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"The Untold Story: How the iPhone Blew Up the Wireless Industry" Six months later, on June 29, 2007, the iPhone went on sale. At press time, analysts were speculating that customers would snap up about 3 million units by the end of 2007, making it the fastest-selling smartphone of all time. It is also arguably Apple's most profitable device. The company nets an estimated $80 for every $399 iPhone it sells, and that's not counting the $240 it makes from every two-year AT&T contract an iPhone customer signs. Meanwhile, about 40 percent of iPhone buyers are new to AT&T's rolls, and the iPhone has tripled the carrier's volume of data traffic in cities like New York and San Francisco.
But as important as the iPhone has been to the fortunes of Apple and AT&T, its real impact is on the structure of the $11 billion-a-year US mobile phone industry. For decades, wireless carriers have treated manufacturers like serfs, using access to their networks as leverage to dictate what phones will get made, how much they will cost, and what features will be available on them. Handsets were viewed largely as cheap, disposable lures, massively subsidized to snare subscribers and lock them into using the carriers' proprietary services. But the iPhone upsets that balance of power. Carriers are learning that the right phone â?? even a pricey one â?? can win customers and bring in revenue. Now, in the pursuit of an Apple-like contract, every manufacturer is racing to create a phone that consumers will love, instead of one that the carriers approve of. "The iPhone is already changing the way carriers and manufacturers behave," says Michael Olson, a securities analyst at Piper Jaffray.
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So that summer (2004), while he publicly denied he would build an Apple phone, Jobs was working on his entry into the mobile phone industry. In an effort to bypass the carriers, he approached Motorola. It seemed like an easy fix: The handset maker had released the wildly popular RAZR, and Jobs knew Ed Zander, Motorola's CEO at the time, from Zander's days as an executive at Sun Microsystems. A deal would allow Apple to concentrate on developing the music software, while Motorola and the carrier, Cingular, could hash out the complicated hardware details.
Of course, Jobs' plan assumed that Motorola would produce a successor worthy of the RAZR, but it soon became clear that wasn't going to happen. The three companies dickered over pretty much everything â?? how songs would get into the phone, how much music could be stored there, even how each company's name would be displayed. And when the first prototypes showed up at the end of 2004, there was another problem: The gadget itself was ugly.
Jobs unveiled the ROKR in September 2005 with his characteristic aplomb, describing it as "an iPod shuffle on your phone." But Jobs likely knew he had a dud on his hands; consumers, for their part, hated it. The ROKR â?? which couldn't download music directly and held only 100 songs â?? quickly came to represent everything that was wrong with the US wireless industry, the spawn of a mess of conflicting interests for whom the consumer was an afterthought. Wired summarized the disappointment on its November 2005 cover: "YOU CALL THIS THE PHONE OF THE FUTURE?"
Even as the ROKR went into production, Jobs was realizing he'd have to build his own phone. In February 2005, he got together with Cingular to discuss a Motorola-free partnership.