Apple has a well-known and well-deserved reputation for technical innovation without sacrificing commercial success in its products – consider the Apple II, Mac 128K and iPod.
  
Apple also has a well-known and well-deserved reputation for some spectacular flame-outs – consider the Apple III, Newton and Mac G4 Cube.    But with its latest product, the iPhone, Apple and wireless operator AT&T clearly succeeded – so much so that Wireless Week has awarded the duo our 2008 Excellence Award in the category of Special Recognition for Mobile Content.

What is especially significant is not just the coolness of the iPhone device itself, but the uniqueness of the Apple-AT&T relationship compared to ordinary device maker-wireless operator relationships. The two historic companies first started working together in early 2005, two years before the iPhone was publicly announced.

AT&T, the largest U.S. wireless carrier with more than 67 million subscribers, also has long been a leader in innovation. With industry-first devices, such as Motorola’s RAZR and the ROKR, and its own world-class wireless network, AT&T’s customers have long benefited from its innovation and leadership in the industry.

The iPhone’s resounding success has turned out well for both sides: Apple predicts sales of 10 million units this year, and that’s a lot of new 2-year service provider contracts.

Game Changers
“The benefit of working with a great company like Apple is to provide our customers with a game-changing device like the iPhone. We’re happy with how the relationship with Apple has carried out,” says AT&T spokeswoman Jenny Parker.

The plan started with style.  The iPhone’s screen and user interface are its most flamboyant differences from ordinary mobile phones.  That was immediately apparent when it was announced on Jan. 9, 2007, in contrast to the unsuccessful integration of an iPod into the Motorola ROKR in late 2005. 

For the iPhone, Apple chose a touchscreen version of a 480 x 320 pixel (163 ppi) TFT LCD. With notable exceptions such as the Palm Treo, touchscreens became unstylish in mobile phones a couple of years ago; Apple is credited with bringing them back by adding a sliding and zooming interface that requires only a fingertip, not any special stylus. 

Another unique feature is that the screen covers almost the entire front of the device without adding thickness or weight – which some traditional handset makers said couldn’t be done because of the contradictory design goals.

So the iPhone’s specialty in mobile content is not that it enables software features that don’t exist anyplace else, but that its enables traditional functions to be accessed in new ways – unlocking the device or seeing the next image in a list by sliding your finger; resizing an image (and perhaps a window in upcoming versions) by performing a “pinch” action; zooming into a Website by simply tapping – all are functions requiring point-and-click actions on lesser phones.

The iPhone Experience

Considering the new software possibilities, a culture clash with AT&T was largely avoided. “AT&T and Apple have different backgrounds – one is obviously a leader in telecommunications, and the other in consumer electronics,” says Parker. “But the launch of the iPhone is a breakthrough in the way companies can truly collaborate to deliver significant new benefits to their mutual customers.”

Apple chose to launch the iPhone on the AT&T EDGE network, and the device was made for the AT&T network and capabilities. The AT&T EDGE network is the largest high-speed wireless data in the U.S. and reaches 270 million people. In addition, the iPhone is Wi-Fi compatible, so users can take advantage of public Wi-Fi hotspots, as well as more than 10,000 AT&T Wi-Fi hotspots for iPhone users who are also AT&T broadband subscribers.

Process Changers
To its credit, there are other examples of how AT&T changed its processes and technology to accommodate the iPhone. “One thing that is different with the iPhone is that we’ve changed the activation process,” says Parker. “Rather than activating it in-store, a customer takes it home and activates it through iTunes. You don’t have to go through any customer agent.”

For that aspect, a key partner was Bridgewater, N.J.-based Synchronoss, specializing in transaction management systems. The company took away plenty of lessons from the iPhone rollout despite some early glitches that were caused by raw scale and by some special customer cases, CTO Pat Doran says. Apple and AT&T helped Synchronoss tweak its API, and now Synchronoss is using Apple’s new software developers kit (SDK) for “toying around with” a possible application for phone analytics and reporting. That could be used by other carriers and for other devices than just Apple and AT&T, he says.

Synchronoss is not alone in its enterprise dreams based on the iPhone. Industry heavyweights such as Sybase’s iAnywhere division and Sun Microsystems also feel the impact created by the iPhone meteor. Sybase already is building an iPhone client for its Mobile Office software suite, and Sun is working on an iPhone version of the Java Virtual Machine client. Meanwhile, the independent iPhone Developer’s Journal hosted its inaugural iPhone Developer Summit in New York last month, with an agenda covering everything from AJAX techniques to social networking.

In addition, the iPhone is the first and only device where AT&T offers Visual Voicemail services, which allow users to visually scan voicemail messages and return the most important calls first. Users simply touch the message and the iPhone automatically dials the person who called them.

Limitations
Experts point out the litany of things the iPhone doesn’t do.  Most noteworthy is that its SDK doesn’t give access to calendar and telephony features, thereby eliminating many third-party software choices available to users of BlackBerry, Palm, Symbian and Windows Mobile devices. As of the most recent firmware update (version 1.4), iPhone users still can’t cut and paste, listen to stereo music through Bluetooth headsets, watch Flash content, perform voice dialing or even conduct a decent contacts search.

Yet the iPhone remains steadfast as the new bar by which high-end mobiles are measured – Apple said more than 100,000 copies of the new iPhone software development kit were downloaded in the first two weeks since its announcement on March 6; meanwhile the venture capital company Kleiner Perkins Caufield & Byers announced $100 million fund just for iPhone applications and services.

The AT&T Experience encourages users to try out devices and capabilities.

“In the beginning, the device vendor controlled the activation process with AT&T, and then it also controlled the mobile content … and now Apple is defining the third-party applications marketplace. The company has still maintained momentum,” says IDC industry analyst Chris Hazelton.

“It has really put a consumer focus for the U.S. segment on smartphones and also on the mobile Web. Whether it was by design, the lack of third-party applications support opened this pent-up demand,” he adds.    The SDK and its Microsoft Exchange and ActiveSync support will “push the iPhone into further segments of the market and it will also push other device vendors to keep pace … Apple is really able to define its own role in the mobile industry.”

Back on the operator side, there are some things AT&T must live with, such as commoditization of its network as the iPhone and iPhone-inspired versions of the Research In Motion BlackBerry, Palm Treo and possibly a whole family of forthcoming Google Android devices go into the wild primarily as computers and only secondarily as mobile phones.

Employees at both AT&T and Apple constantly follow what customers are saying on Web discussion forums and in the blogosphere, officials from both sides note. The boards at discussion.apple.com are very active and, for the most part, uncensored, an Apple representative says.

Other handset makers and carriers are already starting to launch iPhone-esque offerings, but with traditional behind-the-scenes revenue deals. AT&T, however, believes that customers will still have great interest in the iPhone. “With the innovation and quality the iPhone provides, and the power of the AT&T wireless network, we believe our customers will continue to purchase and use the iPhone,” says Parker.