by Tom Kaneshige

iPhone 3.0 Slouching Toward the Web

Jun 26, 20094 mins
Consumer ElectronicsMobileSmall and Medium Business

The iPhone 3GS heralds the end of free content and the beginning of pay-per-use services.

“And what rough beast, its hour come round at last, slouches towards Bethlehem to be born?” – The Second Coming, William Butler Yeats

Ah, summer in San Francisco: I’m strolling down Market Street toward the Apple Store a few blocks away to pick up my first ever iPhone. I’d whistle, if I could. Never one to bask in the warm rays of ignorance, I decided to guess at the hit on my credit card: There’s the iPhone plus accessories and taxes, AT&T’s service, MobileMe, and surely a charge for dumping T-Mobile before my contract is up.

Still two blocks away, I fired up my iPod Touch (which I plan to give to a friend) and read a Bloomberg story I’d downloaded yesterday. The story was about the very real possibility that the New York Times will charge mobile readers using an iPhone to access content. Then I recalled a tweet from @Pogue about two new iPhone apps offering turn-by-turn GPS services for $10 a month.

Suddenly, Market Street seemed a whole lot busier.

[ For tech vendors across all sorts of industries and markets, the iPhone has become a market changer overnight, reports CIO. ]

I took a hard left on Second Street and ducked into a Starbucks to clear my head. Apple had sold a million iPhone 3GS units over the weekend. People across the country stood in line for hours to spend $300 during one of the worst economies in recent history. I could almost hear the Apple fan drumbeat heralding the coming of Steve Jobs later this month, when the great visionary returns after undergoing a liver transplant in a Tennessee hospital. And now this iPhone 3GS is shaking up markets around the world.

This was tech history happening right now. I just had to be a part of it, so I double-timed the last two blocks—running smack into the waiting line for the iPhone 3GS. A friendly Apple guy gave me a black umbrella for shade, and a pigeon promptly bombed it. Yet not even a stupid pigeon could dampen my enthusiasm.

We watched in earnest a recurring rite of passage: The Apple salesperson in a light-blue shirt emerging from the Apple store to escort the next customer inside the iPhone 3GS sales area—roped off like some A-list Hollywood restaurant. The salesperson shakes their hand and asks, a little too wryly, “Are you ready?” Like a new parent, the soon-to-be-owner of an iPhone 3GS beams and nods. After waiting nearly two hours in line, I beamed and nodded, too.

There’s no question the iPhone is giving birth to a new way of life on the Web. Eight out of 10 iPhone owners tap the mobile Internet every week, according to a recent Forrester Research survey, while only four out of 10 owners of those other smartphones do the same. The survey also says the iPhone attracts the young, educated and affluent. Moreover, iPhone owners are twice as likely as other mobile users to go online outside of offices and homes—that is, the iPhone and, more importantly, the mobile Web are quickly becoming a fixture of daily life.

Surely, some revelation is at hand. But what, exactly, is coming?

If you missed the harbinger in March—the beta release of the iPhone OS 3.0 SDK—here is the fateful passage appearing midway in an Apple press release: “Included in these APIs is the ability to leverage the incredible purchase model of the App Store within apps. In-App Purchases will allow developers to offer subscription content and provide the ability to sell new content and features in a simple and secure process.”

For consumers, this fateful passage means no more free lunch. Gartner analyst Ken Dulaney figures publishers will jump on the iPhone’s e-commerce feature. They’re not going to make the same mistake when the Internet first came about, giving away content and services for free. As I write this, Web service providers who know all about selling subscriptions in a recurring revenue business model are ramping up iPhone Apps that will hit our credit cards every month. “We’re heading into the age of micro SaaS,” Dulaney says.

The go-go days of the free Internet are coming to an end, and Market Street is heading toward gridlock. So what are we doing about it? We’re happily standing in line with black umbrellas that block out the summer sunshine and guard against pooping pigeons, and willingly paying hundreds of dollars for an iPhone that will nickel and dime us to death on the Web.

What do you think the iPhone’s impact will be? Send me an email at Or follow me on Twitter @kaneshige. Follow everything from on Twitter @CIOonline.