The iPhone Minds Its Speed

After what must have been an eternity for iPhone-starved Europeans, details on the launch of the coveted Apple (Nasdaq: AAPL) device are finally confirmed. As expected, Deutsche Telekom's (NYSE: DT) T-Mobile will service the device exclusively in Germany, while Telefonica's (NYSE: TEF) O2 has the U.K. all to itself, and France Telecom's (NYSE: FTE) Orange has France locked up.

Before the news came out, blogs were buzzing with speculation about the iPhone itself and whether it would be an improved version of the one released stateside with AT&T (NYSE: T). Of key importance -- to many gadget geeks, anyway -- is whether the phone would run on Europe's new third-generation (3G) networks or remain saddled with the slower speeds of the current-generation network technology called EDGE.

Once it was known that the iPhone is identical to the U.S. version -- slow speeds and all -- many scoffed. But Steve Jobs explained that a 3G iPhone would drain the battery too quickly and potentially anger consumers who expect the phone to hold a charge similar to current devices from manufacturers such as Nokia (NYSE: NOK) and Samsung. By not going with a 3G version, Apple made a big trade-off in denying fast data speeds for the longer-running iPhone.

But here's the kicker -- Steve Jobs doesn't really care.

Apple's new iTunes store supplies songs and ringtones direct to devices via Wi-Fi, and Jobs pointed out that Wi-Fi is the optimum channel for media downloads anyway. To cement this point, Apple's U.K. launch included a deal with The Cloud that will give iPhone users free access to its 7,500 hot spots in the U.K. If the Internet experience on the iPhone is poor via EDGE networks -- as many in the U.S. have complained it is -- it could be less likely that users will download carrier-billable Web content such as games and video. The ones getting left out in the area of content sales by a non-3G iPhone are the carriers, not Apple.

In fact, Vodafone's (NYSE: VOD) CEO, Arun Sarin, recently commented that the carrier would like to offer the iPhone -- once it has 3G capability. So while Apple suffers little from the slow iPhone, its carrier partners are the ones missing out -- at least until the faster iPhone comes rolling into town.

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