Wireless June 17, 2009, 1:21PM EST

The iPhone's New Navigation Weapons

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Gokivo on the iPhone blows up this model. It's the first subscription service to take advantage of the iTunes App Store's new capability for in-application sales; initial purchase of the program is just 99¢, but the service will cost $10 a month.

Leaving out AT&T

This looks more or less the same to the consumer, but there's a big difference behind the scenes, because AT&T (T), the exclusive iPhone wireless carrier in the U.S., is completely cut out of the action. Under the standard App Store arrangement, Apple keeps $3 of the $10 subscription charge and NIM gets $7. And while VZ Navigator is sold as a Verizon Wireless product, and AT&T Navigator, supplied by TeleNav, carries the AT&T brand, Gokivo puts the Networks In Motion name directly in front of the customer.

While the iPhone has definitely been a success for AT&T, bringing in a flood of high-value subscribers, it is also wrecking the carrier's relationship with its iPhone customers and drastically altering the role of third-party service providers, who are used to reaching customers only through the carrier. Apple is increasingly assuming the role of what's known as a mobile virtual network operator, or MVNO, which buys airtime from wireless carriers but acts as the main intermediary with the customer, says Steve Andler, vice-president of marketing at Aliso Viejo (Calif.)-based NIM. "We supply a nav app, and Apple is in complete control of how it will run on the phone."

Navigation is only one market where Apple is using the capabilities of the iPhone and the creativity of its third party to shake up the existing order and knock out intermediaries, especially the carriers. And as other handset makers, including Research In Motion, Palm (PALM), and Nokia (NOK), beef up their application stores and strengthen direct relationships with customers, the pace of change will only accelerate.

Wildstrom is Technology & You columnist for BusinessWeek. You can contact him at techandyou@businessweek.com or follow his posts on Twitter @swildstrom.