WWDC 2008 and iPhone: A deep dive into Apple’s mobile empire

On the keynote stage at Apple’s 2008 Worldwide Developer Conference, Steve Jobs looked like a man who could use a Gatesian escape from the glass house to a quieter life spent in pursuit of passions that a CEO hasn’t time to explore. The difference between Steve and Bill is that Steve’s passion is already in his grasp. iPhone can be seen as a culmination point for much of what Steve has set his mind, hand, and brain trust to in the past decade.

[ See how you can make the iPhone work in your business securely. ]

It is important to strike a distinction between iPhone 3G, the $199 handset ($299 with a memory upgrade from 8GB to 16GB) that will ship on July 11, and iPhone 2.0. The latter, while less celebrated, is the more significant development. iPhone 2.0 is the firmware, operating system, drivers, and applications that run iPhone, iPhone 3G, and iPod Touch.

All users of these devices will be able to download iPhone 2.0, and once installed, the new software will bring all devices into functional parity, except for the 3G high-speed data and GPS autolocation enabled by hardware unique to the iPhone 3G.

Moreover, iPhone 3G will function as the original iPhone does in areas that high speed data services can’t reach, which is most of the world.

What’s new in the iPhone hardware

Apple has given the device a bit of needed attention. The device has undergone a very slight exterior redesign. The back of the handset is now either black or white (I’m not sure of the material) rather than the bare brushed aluminum that takes scratches so easily. I don’t know if the new case relaxes the rigid design that makes the current iPhone so fragile.

The iPhone’s bizarre recessed headphone jack is one of those green-lighted ideas that looked better on paper. Thankfully, it’s been scrapped, decimating the market for $15 iPhone headphone cables.

Apple claims that with a single charge, the iPhone 3G will give users 300 hours in standby, 10 hours of 2G talk time, 5 hours talk time on a 3G network, 5 hours of browsing, 7 hours of video playback, or 24 hours of audio playback.

“Or” is an operative word; Apple’s hydrogen cell is still in development. Not having cracked the case of a new iPhone, I can only guess how Apple achieved this. Perhaps consolidation of iPhone’s freed-up room in the device for a larger battery.

iPhone’s new 3G radio is certainly significantly more power efficient than the GSM/GPRS radio in the original iPhone, and I expect that Apple has learned much about power efficiency in embedded devices during the crafting of iPhone 2.0 software.

As demonstrated using AT&T’s U.S. 3G network, iPhone takes solid advantage of high-speed data services. Apple’s crowd pleaser was the Safari browser, which rendered image-laden Web pages in one half to one third the time it takes the same page to finish over the EDGE network used by the current iPhone. Professional users were more struck by the advantage that speed lends to the downloading of rich e-mail attachments.

Finally, Google Maps was shown taking advantage of the iPhone 3G’s built-in GPS. GPS’s greater precision and frequent updating makes Maps usable for basic navigation, although Google’s cell tower triangulation still deserves kudos for cleverness.

The real strength is the iPhone 2.0 software

The rest of what makes iPhone new and unique has nothing to do with hardware. It’s all about software and services, and it is here that Apple is bringing the battle to competitors in the smart phone and PDA space.

The core iPhone 2.0 device software has evolved since its introduction in March. The primary selling point is still the software development kit (SDK), which gives third-party developers the ability to create custom software that runs on the iPhone and iPod Touch as native applications. Native code runs directly on the device’s CPU, and the performance contrast versus interpreted Java (the handset standard) is considerable, as demonstrated in the game and imaging demos performed on the WWDC keynote stage.

Sega showed incredibly rapid progress of its port of Super Monkey Ball, a 3-D game in which a player guides a ball around obstacles by tiling the course. When shown in March, Super Monkey Ball was a playable proof of concept. Three months later, Sega has five characters and dozens of levels, and iPhone’s accelerometer, which registers tilt and force in real time, makes a pretty decent game controller.

In demo after demo, Apple showed iPhone’s prowess at 3-D gaming, medical imaging, browser-based applications and synthesized music. Smartphone makers should be wary of the iPhone and iPod Touch, but so should Nintendo and Sony, whose DS Lite and PSP handhelds fall within iPhone’s price range.

Apple has the advantage of downloadable software, an open platform and great tools that encourage freeware, an apparent $9.95 standard price for commercial games, and high-quality video output. And, of course, neither DS Lite nor PSP can make phone calls or pull content from iTunes.

All iPhone applications will use the same FairPlay digital rights management (DRM) used to protect iTunes music and video. Developers are required to register for a DRM license key, which costs $99, and they can distribute their applications only on Apple’s AppStore, an extension of the iTunes Music Store.

What may seem limiting at first is actually a boon. With one DRM license, a developer can submit any number of applications to AppStore, and the same license allows a developer to assign a price to an app. Apple will take care of the billing for the software and pay a flat 70 percent of the sale price to the developer.

It’s fertile soil for shareware, and perfect timing. Good coders will be looking for work. AppStore gives them a place to hang a shingle while they wait out the recession.

But AppStore isn’t a fit for applications that you don’t want to share with the world. For $199, enterprises can obtain a DRM key that permits private development and in-house distribution of custom iPhone apps.

Still, neither of the iPhone DRM licenses enables the collaborative development that typifies open source projects. So Apple created a new “ad hoc” license that allows developers private distribution of iPhone executables to up to 100 registered handsets. Groups of coders can share work in progress binaries via e-mail or source code control.

However, even the ad hoc license is not the wide-open solution that the open source community ultimately desires. An iPhone user should be able to opt into installing and running unsigned applications, a capability offered by all competing mobile platforms.

A mixed bag on corporate e-mail

Apple remains chuffed about iPhone 2.0’s Exchange Server connectivity, which it counts on to get iPhone through the doors of enterprises. By itself, this is not enough to make iPhone an enterprise device. So Apple kicked iPhone several rungs up the ladder toward that goal by adding on-device rich attachment viewing to iPhone 2.0. The viewers cover not only Office and PDF document types, but iWork 08’s Pages, Numbers and Keynote, which are Apple’s house-brand word processor, spreadsheet and presentation programs, respectively.

Apple now recognizes that Exchange isn’t everyone’s cup of tea (least of all, mine), and that there are professional users who don’t have a data center to call home. The trouble is, the iPhone can only receive push messages from Exchange, leaving BlackBerry in the catbird seat with its two-pronged approach that permits e-mail hosting at the enterprise through BlackBerry Enterprise Server, or via a linked carrier/BlackBerry infrastructure called BlackBerry Internet Services (BIS). BIS is fully WAN-hosted and wired for immediate push of inbound e-mail.

To equip the iPhone for push without Exchange, Apple took a page from BlackBerry’s BIS — but only a page. Apple will host a centralized notification server, a key element of BlackBerry’s infrastructure, to add push capabilities to iPhone’s e-mail client.

Apple bests BlackBerry for individual users by building a suite of Web 2.0 applications that provide subscribers with access to their e-mail, calendar and address book from anywhere, with changes synchronized, with push notification, to the iPhone over the air. As a topper, Mac users’ desktop e-mail, calendar and address book sync with the iPhone as well.

Apple is permitting developers open access to its notification server so that push and notify can be wired into third-party software.

Apple’s full set of hosted collaborative services and Web apps are extended only to those who pay $99 per year to subscribe to MobileMe, formerly known as .Mac. The subscription covers the aforementioned hosted services with 20GB of storage, along with the requisite personal photo galleries, blogs, file serving and Web pages.

MobileMe’s iDisk presents itself as a remotely mountable file system for off-line backup, accessible from Windows and Mac systems, and Back to My Mac uses MobileMe’s network as a tunnel to a user’s home or office Mac from a remote location.

Apple allowed .Mac to languish for years, with its chief benefit being a mac.com e-mail domain. Apple’s overdue exploitation of its Internet service may have been occasioned by iPhone 2.0, but MobileMe offers substantial benefits for all users who spend time on the road. The new me.com e-mail domain doesn’t have as much snap to it, but MobileMe subscribers get a mac.com address as well.

iPhone 2.0 and MobileMe extend Apple’s value well beyond what iPhone the device, or even iPhone 3G, could achieve as a mere terminal, albeit a pretty and feature-full one, on a wireless carrier’s network. Apple has taken a massive step toward turning its handset into a 70-nation mobile empire that transcends carriers.

Of course, there are aspects beyond even Apple’s control, such as carriers’ coverage plan pricing and electronic component shortages that can bring production to a halt at inopportune times (like now). I’m left wondering whether iPod Touch, the highly desirable phoneless iPhone, will drop in price from its current $299.

Apple also cannot predict the response of other carriers and handset manufacturers. Competitors are in a decidedly rough spot, with no chance of getting their scatterbrained development and mobile services stories straight any time soon.

In the meantime, they can focus on the iPhone’s weaknesses. For example, the iPhone cannot be used as a mobile Internet gateway for notebooks. This limitation delights carriers, which sell iPhone with “unlimited data” plans that permit only Apple’s iPhone applications to pass data through the cellular network.

Developers cannot create custom code that opens arbitrary TCP or UDP ports, and the iPhone has no support for background applications. (I’m addressing iPhone’s other competitive vulnerabilities in this week’s Ahead of the Curve blog.)

Suffice it to say that no competitor is positioned to ride what the iPhone lacks to victory.

Apple won’t have of all the pieces of its mobile solution stitched together by July 11. Apple’s iPhone developer program is closed to new registrants — Apple should have reserved spots for the hardy coders who made the trek to WWDC. AppStore will not be on-line for the July 11 launch, and MobileMe is still just .Mac with an alternate URL.

The iPhone 2.0 story is now told, but it will take most of 2008 to complete the journey from outline to execution. That gives developers and prospective buyers a worthwhile pause to take in the market as a whole and to see how iPhone competitors will respond.

There are already gorgeous new handsets out from HTC and BlackBerry, but as Apple’s strategy shows, a mobile empire is not built with a device. It takes software, committed developers and accessible, comprehensive services covering the range from consumers to enterprises.