Best of 2007: The iPhone

The iPhone has become iconic.

After months of speculation and anticipation, Apple Inc. officially launched the iPhone on June 29 on the AT&T Inc. network, an event that many say will reshape the face of the industry.

It was quite a heady summer’s day, with Appleheads standing in line, and various other cellular outfits issuing “news” in an attempt to piggyback on the media frenzy.

Sure, the iPhone had some trouble out of the gate with activation issues, and in the fall Apple decided to discontinue the 4GB model and slash the price of the 8GB version by $200, sparking the anger of early adopters and forcing a $100 refund. But it also sold its one-millionth iPhone a scant 74 days after the launch of the device. In comparison, Apple said, it took two years to sell its one-millionth iPod. And just recently Apple expanded the iPhone launch to England, Germany and France.

But beyond just being another big success for Apple, the iPhone has changed the rules of the game in the handset market.

“There are 10 million engineers in Asia right now working away on something that looks and feels like the iPhone,” says David Chamberlain, principal analyst for wireless at In-Stat. “Apple’s market share will not disrupt the market in any way in the next two to three years, but it will wake up these very drowsy vendors and force them to do something other than cookie-cutter phones. They’ve been adding features without disrupting the industrial design, and they realize now they’ve been in a rut.”

Apple’s Steve Jobs

To remedy that, top manufacturers and service providers have been focusing on giving the iPhone a run for its money by embracing the touchscreen. Sprint has launched the “Touch” handset, a Windows Mobile device with no keyboard. And Verizon Wireless launched the Voyager by LG Electronics, which features a large touchscreen but also opens to reveal a full QWERTY keypad.

Motorola Inc. and Nokia also have announced moves to get “touchy.” The former has purchased 50 percent of Sony Ericsson’s stake in UIQ Technology, a mobile software developer that provides a platform for touchscreen smartphones. And Nokia said it will upgrade the Series 60 user interface for smartphones with touchscreen capability, and license it to its competitors.

“We will be looking for the amazing new features from each new handset,” says analyst Jeff Kagan. “I think the pressure is turned up on the handset makers to come up with ‘wow’ features going forward.”

Those features could be enabled either by the handset makers themselves, service providers or third-party software developers. In fact, after infuriating developers by issuing a software update in September that disabled third-party apps loaded on the device, Apple CEO Steve Jobs announced that the iPhone after all will be opened up as a development platform in February, when the computer juggernaut releases an SDK.