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iPhone Phenomenon is About Human Factors

Despite early harping about price, missing features or lack of the latest 3G protocols, the iPhone's strongest feature -- its user interface and associated brand -- will be what carries Apple's nascent mobile phone business going forward, according to Gartner's assessment.

The iPhone's use of capacitive touch-screen technology and sensors, the unique user interface software and ultimately the physical design are what is most striking about the device. It's all about human factors.

To be sure, says Gartner, its core technology platform is relatively conservative for a mid-2007 smartphone. The iPhone lacks some high-end features such as GPS, video capture, 3G support and a replaceable battery -- although Apple claims that recent battery tests indicate the iPhone can deliver eight hours of talk time, six hours of Web browsing, seven hours of video playback and 24 hours of audio playback.

As important is how the iTunes and Web access -- as a media management and acquisition application, respectively -- will evolve U.S. consumer interest in rich media on a mobile device. To that end, the inclusion of a full Safari browser engine on the device, allowing for full Web-page access, is a crucial first step.

Complementing this is an agreement with YouTube and Google to re-encode videos into H.264 compatible versions. Gartner notes that H.264 is the video compression standard selected by the 3rd Generation Partnership Project (3GPP). All that said, they believe that critical yardsticks to measure the success of the device and AT&T's service will include:

Steady and rapid innovation of new products -- Apple must keep delivering a steady stream of new products so it does not lose the incredible momentum it has built over the past five months. Based on Apple's history and the short product life cycle of nine to 12 months in the handset market, it's Gartner's opinion that Apple needs to launch a second, lower-priced handset within nine months to keep the product line fresh.

The Apple-AT&T relationship will need to manifest unique new media-related and other services to prove value and innovation -- the promised seamless Web access is an impressive start.

Apple's accomplishment during a short period of time is impressive. Without having previously launched a phone product, Apple is already a premier brand in an extremely competitive North American handset market. Also, Apple was able to negotiate a truly unique deal with AT&T.

Operators control the power in the North American handset market and Gartner believes that Apple has secured a deal that lets it set wholesale pricing, and terms and conditions -- along with a host of other advantages. What makes that remarkable is that it all happened before the first paying customer ever completed a call on the iPhone.

Now the question remains as to whether Apple can replicate this event in Western Europe. I believe that Apple must learn from AT&T's service activation trials and tribulations. Clearly, Apple got a first-hand lesson in understanding the reality of Telco back-office system capabilities. To an informed observer, the problems that iPhone customers have experienced were predictable.

I recommend that Apple's European launch anticipates mobile service provider activation scalability constraints, and plan to set customer expectations accordingly. As an example, there was no logical motivation to launch all U.S. markets on the exact same day -- this was essentially a plan to fail, and foolishly anger early-adopter customers in the process.

A better staged and thoughtfully staggered market launch will enable the chosen European mobile service provider to accommodate the pent-up demand for above-normal levels of new service activations, and thereby offer iPhone customers a truly positive first-impression of product sales and support.

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