The iPhone 3G Unveiled

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E-mail messages, calendar updates, and contacts are updated live via a wireless Internet connection, and data are synchronized between the iPhone and a Macintosh or Windows PC.

Google's (GOOG) map application has been integrated into contact lists. The service also lets users update their online photo albums directly from iPhones. Users will also be able to store up to 20GB of data from both their computers or their iPhones via an application called iDisk. The service will be available for $99 a year, and also available for a free 60-day trial starting in July.

Apple is able to make such a large price cut because wireless carriers including AT&T will subsidize about half the price of the new phone. Under existing arrangements, Apple takes a cut of the revenue collected by carriers for iPhone service plans. Analysts have speculated that Apple's share is as high as 30%, though precise deal terms have not been disclosed.

Under arrangements for the new iPhone, Apple is relinquishing the revenue-sharing arrangements in exchange for subsidies it hopes will move more phones off shelves. "Higher unit volumes will offset removal of carrier revenue share payments," Piper Jaffray (PJC) analyst Gene Munster wrote in a June 9 research note. AT&T said in a regulatory filing that its bottom line will take a hit as a result of the subsidies. Earnings will be cut 10¢ to 12¢ through the end of 2009, the company said. Owners of iPhones tend to generate double the monthly service revenue as owners of other devices, AT&T added.

Apple also introduced several new software applications created by third-party developers. Earlier this year, Apple made available a kit that makes it easier for software writers to create applications for the iPhone (BusinessWeek.com, 3/6/08).

New applications include an auction program from eBay (EBAY), a series of games from Sega and Pangea Software, a friend locator from wireless startup Loopt, and a pair of medical programs from Modality. The Associated Press, the global news organization, also demonstrated a service called the Mobile News Network, which gathers news content based on the phone's location, but also gives iPhone owners the ability to send photos and text to the AP when they see news happening. The blogging service TypePad also debuted an application for blogging directly from the iPhone.

Widespread Apps

Jobs said applications will be available from Apple's iTunes store and will be available in 62 countries. Small applications that require 10MB of memory or less will be downloadable over the air, while larger ones will require either a Wi-Fi connection or installation directly from iTunes. Developers who sell their software through iTunes will set the prices and will be allowed to keep 70% of the revenue from sales.

Corporate customers will be able to distribute applications to employees. Corporate technology managers will have the ability to authorize phones on their networks, and then create an approved list of applications that can run on those phones.

With Robert D. Hof in San Francisco.

Hesseldahl is a reporter for BusinessWeek.com.