The Improved iPhone Tackles Europe

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consumers (who will pay $199 for an 8GB model plus monthly AT&T (T) charges of $40 and $80), but the price could still limit the iPhone's appeal in Europe, where network operators sometimes offer rival products, such as the Nokia N95, for free. And while consumers have shown a keen interest in Apple's new phone, Carolina Milanesi, research director at consultancy Gartner (IT) in Britain, thinks that may not translate into extra sales. "The price of many of these contracts is still quite high," she says.

Analysts also caution that despite big improvements, the iPhone's specifications may not make the grade for some European consumers. Its built-in camera, for instance, has only 2-megapixel resolution, while Sony Ericsson recently launched a phone with an 8.1-megapixel camera. Also, the iPhone can't record video yet. And rivals are quickly matching its once-capacious memory. "The handset is a little behind on some aspects of technology," says Gartner's Milanesi.

The Answer to Consumer Cries?

None of that may matter to consumers who fall in love with the iPhone's user-friendly interface and touchscreen. The handset's ease of use, along with premium applications and swift Internet performance, are a boon to the wireless Web. According to mobile market researcher M:Metrics, 80% of iPhone owners in Britain, France, and Germany regularly surf the Web on their mobiles, compared with 11% of regular cell-phone users. That translates into higher revenue for operators.

The combination of lower price and better performance could well kick-start the popularity of the iPhone in Europe. After all, consumers are crying out for a handset that combines traditional voice services with 21st-century mobile multimedia entertainment. The iPhone 3G could be what they want; the question is whether they're willing to pay for it.

Scott is a reporter in BusinessWeek's London bureau .