The story of the iPhone, continuing with the 2008 iPhone 3G, which added UMTS/HSPA speeds, a plastic shell in black and white, and carrier-subsidized pricing
At WWDC 2008 on June 9, after finalizing the details of the upcoming App Store, and summing up the original iPhone's achievements, the late Steve Jobs dove into the next challenges Apple had to face, the next mountain they had to climb. On the surface, they were obvious even before Jobs bulleted them on stage - 3G, Enterprise, third-party apps, more countries, and more affordable. The software changes came as part of iPhone OS 2.0. The hardware, iPhone 3G.
“Just one year after launching the iPhone, we’re launching the new iPhone 3G that is twice as fast at half the price,” said Steve Jobs, Apple’s CEO. “ iPhone 3G supports Microsoft Exchange ActiveSync right out of the box, runs the incredible third party apps created with the iPhone SDK, and will be available in more than 70 countries around the world this year.”
The iPhone 3G, codenamed N82 and model number iPhone1,2, had the same 3.5-inch screen at 320x480 and 163ppi as the original. The cellular radio, however, received a significant update to support 3G UMTS/HSPA networks. That allowed for a much faster - theoretical - 3.6 mbps data transfer. Jobs claimed it was faster - 36% - than other leading 3G phones of the time, including the Nokia N95 and Palm Treo 750, even while rendering a better version of the web.
The Dock connector remained, but Apple changed some of the pins so it no longer supported charging over FireWire, which rendered some accessories incompatible. It had the same Bluetooth 2.0 + EDR and 802.11 b/g Wi-Fi as well, but added an aGPS (assisted global positioning system) chip for more precise location services.
As the model number suggested, however, Apple didn't consider the iPhone 3G as full, next generation update. It was the first model, made proper. That was probably due to the chipset remaining the same, ARM-based Samsung 1176JZ(F)-S processor and PowerVR MBX Lite 3D graphics, with 128MB of RAM already showing its age and limitations. So were storage options, at 8 and 16GB for NAND Flash. Curiously, the battery dropped to 1150 mAh, though not at the expense of battery life.
There was still no CDMA and EVDO Rev A model, which meant still no possibility for Verizon or Sprint. Since Apple remained exclusive to AT&T, though, so it didn't much matter in the U.S.
Sensors and camera likewise stayed the same.
There was, however, a big change to the design. Apple changed the original, aluminium casing for new, polycarbonate ones with metal buttons. That let them improve RF transparency - allowing for better reception - but also offer the iPhone, for the first time, in multiple shades. The front plate remained uniform black, but for the 16GB model, the back was made available in both black and white. It didn't look quite as high end Apple as the original, and had some issues with hairline cracks around the cutouts, but it did manage to be both sturdy and reliable. It was rounded instead of flat on the back, allowing Apple to call it thinner at the edges. It also improved audio and "fixed" the headphone jack, making it flush and hence, more compatible with more headphones.
The biggest difference, 3G and GPS aside, was the price. Jobs said that, according to Apple's research, 56% of potential iPhone customers didn't buy because of the price. Yet the value of the iPhone - it's ability to drive adoption of premium services - had been proven to carriers. So Apple was able to convince them to subsidize the price. It dropped from a whopping $499/$599 on contract to a much friendlier $199/$299.
The iPhone 3G launched on July 11, 2008, and it launched internationally. By the end of the year, it reached 70 countries. Apple also launched iPhone OS 2.0, the App Store, and MobileMe (now iCloud) on the same day, something that overwhelmed so many servers for so long they've switched to staggered rollouts ever since. It took just one weekend to sell over one million. Apple:
“iPhone 3G had a stunning opening weekend,” said Steve Jobs, Apple’s CEO. “It took 74 days to sell the first one million original iPhones, so the new iPhone 3G is clearly off to a great start around the world.”
Reviews were likewise enthusiastic, even with some reservations. Ed Baig of USA Today:
It's cheaper, faster and a lot friendlier for business. Apple's blockbuster smartphone already had nifty features such as visual voicemail, a splendid built-in video iPod and the best mobile Web browser I've ever used. With GPS newly added to the mix, this handheld marvel has no equal among consumer-oriented smartphones.
Jason Snell of Macworld:
If you’ve been cautious and waited a year for the second generation of iPhone, your patience will be rewarded. The iPhone 3G improves on the original iPhone’s audio quality, offers access to a faster data network, and sports built-in GPS functionality. You’ll also be getting in on the ground floor of the exciting new world of third-party software written for the iPhone. And business users will appreciate the iPhone’s new Exchange syncing features.
The App Store is what would drive the iPhone for years to come, but the price drop is what would drive its sales. Both began with the iPhone 3G, and with it, Apple began the mainstreaming of the smartphone.
The existing, entrenched smartphone vendors of the time, Microsoft, Palm, RIM (BlackBerry), and Nokia spent 2008 as obliviously as they'd spent 2007. They talked a lot, but none of them showed a single sign that they realized the iPhone had absolutely changed everything in the market. RIM's Mike Lazaridis:
I couldn’t type on the [iPhone] and I still can’t type on it, and a lot of my friends can’t type on it. It’s hard to type on a piece of glass.
Verizon's Ivan Seidenberg:
Steve Jobs eventually will get old . . . I like our chances.
Yet Verizon was pressuring RIM into building their so-called "Apple Killer", which eventually came to market as the lackluster BlackBerry Storm. It did so poorly, as did its successor, the Torch, that Verizon would have to eventually come to terms with Apple.
Microsoft's Steve Ballmer:
I agree that no single company can create all the hardware and software. Openness is central because it's the foundation of choice.
Olli-Pekka Kallasvu, former CEO of Nokia:
He said Apple's vertically integrated model, where its hardware and software are tightly controlled by the company, further fragmented the market. And he added that what is truly needed is more openness in developing applications.
Windows Mobile 6.5 was hitting the market, a release so unimpressive Microsoft would have to rip-and-replace it with Windows Phone 7. Eventually. Nokia's Symbian was likely falling so far behind that Kallasvu's replacement, Stephan Elop, would declare it a burning platform and turn to his former employer, Microsoft, and their rebooted mobile OS in hopes of putting out the flames.
Google, an original iPhone launch partner, however, was far more perceptive, and more agile. They'd already bought Danger, the next generation phone platform created by Sidekick mastermind - and former Apple employee - Andy Rubin. They'd originally focused on making a Windows Mobile competitor, determined to make sure Microsoft could never dominate the market and cut them out of the mobile future they so clearly recognized would be the next big thing.
Then the iPhone happened, and Eric Schmidt, who was then on the Apple Board of Directors, Realized Microsoft wouldn't dominate in mobile at all. Apple would. So Google, much to Steve Jobs' consternation but to their credit, spun around and refocused Android at the iPhone.
The first consumer smartphone powered by Android was the HTC G1, called the Dream internationally, and it shipped on T-Mobile in late 2008.
The effects weren't immediate, but Apple and Google's relationship would never be the same, and the iPhone, which had a shot at market share leadership thanks to the paralysis of RIM and Nokia, would never attain it in a post-Android world.
By June of 2009, the original iPhone was gone but the iPhone 3G had sold somewhere around 20 million units. At that point, the it was dropped down to $99 on contract, and became Apple's first less-expensive iPhone.