iPhone Answers 3G's Call

Confirming months of rumor and speculation, Apple (Nasdaq: AAPL) CEO Steve Jobs marched on stage at the company's Worldwide Developers Conference in San Francisco Monday to unveil a new model of the iPhone.

The new iPhone will run on third-generation, or 3G, networks, which offer higher data transfer speeds than the EDGE network that the original iPhone runs on.

In addition, the new iPhone will sell at the bargain price of US$199 when it goes on sale on July 11. When it first debuted less than a year ago, the original iPhone sold for as much as $599.

The new iPhone also features global positioning system (GPS) technology, which lets users pinpoint their exact location anywhere in the world and integrate that data with a map or a location-based software service.

Mobile Me made its debut at the conference as well. Phil Schiller, senior vice president of worldwide product marketing , described the service as "[Microsoft] Exchange for the rest of us."

It allows users to instantly synchronize e-mail , contacts and calendars across multiple devices, all of which will communicate with a central cloud. The service replaces .Mac, offers 20 GB of online storage, and will cost $99 per year.

Deep Discounts

The decrease in the iPhone's price is likely due to a large subsidy from exclusive iPhone carriers like AT&T (NYSE: T), according to In-Stat Principal Analyst David Chamberlain.

"[The price decrease] might hurt AT&T in some regards, because somebody's paying down the price of this," he told MacNewsWorld. "My guess is that AT&T is the one that's increased their subsidy -- not Apple decreasing their wholesale price. That's the most likely scenario."

Still, the price point could work to draw new customers -- most of which will come at the expense of competing carriers.

"This is probably more of a play to get even more people signed up," Chamberlain continued. The timing is probably going to take away more from Sprint (NYSE: S) and its Samsung Instinct phone."

Developers' Day

The iPhone was not the day's only announcement -- indeed, Jobs saved news on the new hardware for the final part of his presentation. The bulk of the keynote focused on the iPhone software and what it means for developers.

Jobs let Scott Forstall, senior vice president of iPhone software, take the wheel during the software developer kit portion of the keynote. The SDK was released in beta last March, and it includes tools that developers can use to create new, native applications they can then sell or give away via Apple's App Store.

Forstall outlined the utilities available to developers, including Cocoa Touch, a user interface object-oriented framework. "This makes building applications for our full screen touch interface an absolute breeze," he said.

Also on display were the Xcode tool for writing, editing and debugging code; an Interface Builder; an iPhone Simulator for running programs on a Mac rather than on a test phone; and Instruments, a performance optimizer.

Forstall then demonstrated the kit, creating a basic application for finding nearby friends by using location-based services and the user's own contact list.

Projects in the Works

When Apple unveiled the SDK months ago, it made a point of shining the spotlight on a few high-profile technology companies that had created new iPhone apps after privately testing the toolkit for a short time.

This time, Apple checked back on the progress some of those companies had made. It also trotted out a few other developers who had come up with unique applications.

Sega showed its progress on "Super Monkey Ball." It was one of several game makers Apple gave stage time too, hinting that games may come to be one of the App Store's most important categories.

eBay (Nasdaq: EBAY) also touted a mobile shopping and selling program, while MLB.com showed off a sports application that gives the user up-to-the-minute sports news, stats and video. Developer Mark Terry demoed Band, a music program that lets the user simulate instruments like drums and a piano.

Push - not Background

Forstall also took time to address a question he said he's repeatedly received from developers of instant messaging applications. They want a way their programs can deliver messages to users even when the app isn't running.

Allowing background processes is the wrong way to address the problem, Forstall said.

"That application you think you quit will continue to drain the battery in the background," he noted.

Foreground application performance could also suffer as the background-running app weighs down processing speed.

Instead, the iPhone will feature a unified push notification service for all developers, Forstall said. Apple will maintain a persistent IP connection to the phone, allowing for messages like customer alerts.

Jobs then returned to the stage to run off a few features of the iPhone 2.0, an extensive software update that will be sent out to iPhones in early July.

New abilities include contact search, iWork document support, and a scientific calculator that activates when the iPhone is turned on its side while running the regular calculator program. Parental controls will also be included, as will support for Japanese and Chinese. One way of inputting Chinese characters will involve the user drawing figures onto the iPhone's touchscreen.

"It's one of the advantages of not having a bunch of plastic keys for your keyboard," Jobs quipped.

App Distribution Innovations

For users to obtain iPhone software, they'll have to use the Apple App Store, which can be accessed via a computer or on the iPhone directly. Applications smaller than 10 megabytes can be accessed via the iPhone's cellular connection; anything larger must be downloaded via a WiFi connection or through a computer.

Jobs announced some alternate ways for developers to distribute applications. An enterprise that doesn't want to make an application available to the general public can create software that only runs on iPhones that it has authorized, for example. It can distribute the app over its own in-house intranet.

Ad hoc is a third method of application distribution, under which the developer certification program can be expanded to 100 iPhones. It enables sharing in a teacher/university setting, for example.