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At last month’s WWDC event, Apple’s chief executive Steve Jobs did an onstage test of the iPhone 3G download speed versus that of its 2G predecessor. There was really no comparison, the 3G model blew the other one away. But many in the audience, myself included, really didn’t find the 3G speed all that impressive either. That should soon change.

When the iPhone 3G launches next Friday, AT&T’s 3G network will be ready with download speeds of 1.7 megabits per second. That may sound good, but that is also the maximum, it’s probably unreasonable to expect speeds of that nature at all times. This means that those of us used to broadband speeds are still likely to be at least slightly underwhelmed.

However, within a few months of launch, AT&T hopes to increase those speeds four-fold, Bill Hogg, AT&T’s president of wireless network services recently told Forbes. Such speed would then be comparable to broadband and should take web browsing on the device to a level beyond the already high level it is currently at.

All of this of course only matters if you’re living in an area with 3G coverage. If you’re in or around a big city in the United States you’re probably fine, otherwise be sure to check out this map. Right now, AT&T says 3G support is in 280 markets and it hopes to increase that to 350 by the end of the year.

Google has unveiled a web-based version of its Google Talk instant messaging client specifically built for the iPhone. Quite simply: It’s amazing — but it has limitations.

Just as with Google’s other apps built for the iPhone, Google Talk is laid out in a way that is nicely tailored for the device. Its main screen is a list of your contacts’ names, icons (if they have one) and status messages. Each contacts’ area is big enough for you to easily click on any of them. Doing this will take you to another screen with a big white chat area to have a continuous IM conversation.

I’m using it right now to talk to fellow VentureBeat writer Dean Takahashi; it’s simple to use and fast (granted, I am on a Wi-Fi connection right now).

You have all of the standard options you have on regular Google Talk including changing your status message, searching contacts and you can even take chats “off the record,” meaning they won’t be saved to Google’s databases (if you have that feature turned on).

But if you do have that feature turned on and you have a chat while on the go, you can simply to into Gmail and find it under in the ‘Chats’ area. This is great for referencing things said in a conversation at a later point. Such as addresses or numbers.

Just as with the web version, the iPhone version of Google Talk will also tell you if a friend is currently typing. It’s amazing how well everything has been ported over.

While it’s a great app in and of itself, the real excitement is in its promise. A real instant messaging service could greatly eliminate the need for the massive rip-off that is text messaging.

It’s not there yet. For this app to currently work, you have to have your Safari browser open all the time and pointed to the Google Talk page. When you leave the page or the browser, it shuts down and sign you off.

However, at the WWDC event Apple talked about its upcoming Push Notification Service that will presumably allow for instant messaging applications to mimic running in the background while using Apple servers push updates to your phone. It’s not clear how well this will work, or what restrictions (if any) Apple will place on 3rd party IM applications. (I’d venture to guess that if any of the IM clients are going to work unrestricted, it will be Apple’s own iChat application — which it hasn’t announced for the iPhone — yet.)

One thing is clear though, this Push Notification Service will be meant for native applications, not web apps. So if Google wants Google Talk to work with this, it will need to make an official app for it.

AT&T can’t be too happy with companies releasing applications such as this. First of all, a lot of people are now going to have the Google Talk page open all of the time, constantly keeping their connection alive and eating up data. But more importantly, it has the potential to eat into one of AT&T’s big money makers: text messages.

While IM applications on devices such as the iPhone may not eliminate the need for text messaging right away (other phones do have IM after all and text messaging is still around), at least for me, they will drastically cut down on the number of texts I send.

Ever since I got the iPhone a year ago, my texting amount has gone up drastically. One reason for this is that Apple made a beautiful texting application that looks like iChat and saves the previous texts you’ve sent to a person. But texting is going to be between $5 and $20 dollars a month extra beginning with the iPhone 3G. Yes, that is on top of your data plan — I ask again: Isn’t a text message data? And a very small amount of it to boot?

There is no way I’m paying an extra $20 a month to send 160-character messages when I’m already paying for “unlimited” data. Instead I’ll move most of my conversations over to mobile IM and get my money’s worth of the data I’m paying for.

This is an early step towards the death of text messaging as we know it, but an important one. The next step will be a native IM app on the iPhone. I fully expect that the mobile companies will eventually start to include unlimited text messages in their unlimited data plans. Sprint is doing this already. That’s the way it should be.

We’ve been fleeced long enough.

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With the pricing and release details finally out for the iPhone 3G, we’re starting to get some answers about what will happen to first generation iPhones when users upgrade.

While AT&T would prefer that you hand off your old iPhone to a friend or family member who could then reactivate it (with one of its service plans), it’s acknowledging that you will still be able to use the device without cellular service. The Wi-Fi, iPod and other various non-AT&T network functionality will remain intact.

In other words, your iPhone will become an iPod Touch.

If you do wish to hand off your old iPhone, AT&T has a short tutorial [PDF] for the steps you should take to do so. It even, finally, acknowledges that you can take out the device’s SIM card — you just need a paperclip.

There’s also been quite a robust eBay market emerging for first-generation iPhones, seeing as they can easily be unlocked and used on other networks. Since you’ll have to activate your iPhone 3G in-store complete with a 2-year service agreement with AT&T, unlocking the new iPhone won’t be as straight-forward. At least not until the non-contract iPhones go on sale at a later date.

Another option for you first-generation iPhone owners may be to use it as a remote control for iTunes. Buried in the code of the pre-release version of iTunes 7.7 is wording indicating that a free app of this nature is coming shortly. If someone creates an app that lets the iPhone control your entire home entertainment center, I’m sold.

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[photo: flickr/msk]

Updated

Man, I’m pretty steamed about the just-revealed details of the iPhone 3G price plan — and if you’re an existing AT&T customer, you should be too. After all the fuss about the $199 iPhone, it turns that those of us already on AT&T plans are going to have to pay twice as much — namely, the existing iPhone price of $399.

Not surprisingly, I’m less-than-thrilled about this news. It’s starting to feel like everything after the announcement of the iPhone 3G at WWDC has been a string of “Wait, but there’s a catch …” First, AT&T said it’s increasing the price of iPhone’s data plan by $10 a month. Next, MG Siegler noticed the real ripoff: You’ll need to pay extra for text messaging.

Still, those announcements fell under the heading of “annoying but fair.” Basically, they seemed like AT&T’s way to recoup its iPhone subsidy by charging its customers extra rates. This news, however, means that people like me — AT&T customers who haven’t bought an iPhone yet — get the worst of both worlds; we lose out on the discount, and we get to pay the increased rates. It’s like I’ll be subsidizing AT&T’s efforts to bring customers over from other carriers. Um, thanks?

So you’re probably thinking, “If you don’t like it, why are you buying an iPhone?” Good point. In fact, I’m so peeved about this, that I’m going to boycott the iPhone. For a day.

It’ll hurt, but I’m totally going hold off on my purchase until July 12. Take that, AT&T!

Update: As several commenters pointed out, I should have mentioned that if you’re eligible for a phone upgrade, you can still pay the lower iPhone prices. Sadly, I’m not eligible for such an upgrade, so my boycott plans proceed apace.

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Apple and AT&T have finally hammered out all of the pricing and contract details for the iPhone 3G. It’s mostly what was expected — but there are some curveballs

The 8 gigabyte version will cost $199 while the 16 gigabyte version will be $299. Both of these prices require a 2-year service agreement with AT&T. However, to receive this subsidized price you must be eligible to do so. So who is eligible? Anyone who bought an original iPhone, new AT&T customers and customers whose old AT&T service plans are fulfilled.

Those who have time remaining on an existing AT&T plan for a phone other than the iPhone will have to pay $399 for the 8GB model and $499 for the 16GB model — both of these will also still require a 2-year contract.

AT&T price plans for the iPhone 3G will start at $69.99 for 450 anytime minutes with 5,000 nights and weekend minutes. As expected, this is $10 more than the original low-end iPhone plan without the 3G support. Other plans include $89.99 for 900 anytime minutes and $109.99 for 1,350 anytime minutes. If you want completely unlimited anytime minutes that will be $129.99.

None of these plans will include text-messages — as I’ve stated before, this is the real rip-off. Despite having an “unlimited” data plan, it will cost you an extra $20 for unlimited text messaging as well. You can also pay $15 for 1,500 message or $5 for an incredibly lame 200 messages.

Even this $5 a month extra will end up costing you $120 over the life of your contract. Again, I thought we were paying for unlimited data, why doesn’t this include text messages?

All iPhone purchased on launch day will be required to be activated in stores. Yes, the nightmare scenario is true. This is going to add a lot of time to the buying process.

With the original iPhone Apple and AT&T allowed customers simply to buy the device and take it home to activate it via iTunes. This time around, to eliminate the temptation to unlock the device (to use on other networks), the entire process, including credit-check, etc, will be done in-store.

The lines may be reduced a bit as Apple has opted for a 8AM local time launch rather than a 6PM launch like it had last year. This also may lead to quite a bit more camping out outside the stores to wait for the device.

Business users will want to buy the Enterprise Data Plan for the iPhone. This will cost $45-a-month versus the $30-a-month for consumer data plans.

All iPhone 3Gs will come with the iPhone 2.0 software including the App Store.

Buried in all of this data is the biggest curveball of all though. If you want to purchase an iPhone without a contract, you will be able to do so eventually — just not on launch day. You will pay $599 (8GB) and $699 (16GB) for that privilege — which is still a lot cheaper than signing any of AT&T contracts.

But, and this is a big but, AT&T claims that these no-contract iPhones will still be locked into AT&T’s network. The idea is just to allow users to pay month-to-month if they wish. It’s not yet clear how AT&T will enforce this — but you can be sure there will be work-arounds.

So if you really want an iPhone 3G but really don’t want to use it on AT&T’s network, wait. For everyone else, see you at an AT&T or Apple store at 8AM on July 11. There will be no online sales initially.

And one more thing: Existing customers save $18 on activation fees.

updated
Lithium Technologies, which builds and operates social networks for enterprises, has raised $12 million in venture capital today.

The company’s clients include Dell, AT&T, Sony PlayStation, Univision, and PayPal — all businesses with large user communities and heavy customer service and product support needs. Lithium’s community sites are designed to help these clients streamline the interaction with their customers and improve brand loyalty. To get an idea of how the sites function, take a look at the one Lithium designed for Dell. With features such as Dell forums where customers can engage with each other to answer support questions and share tips, the main point is to build brand loyalty in a two-way conversation with consumers.

The idea is to use best practices to stir up people like Jeff Stenski, a Dell customer who has voluntarily spent the equivalent of 141 days of his time over the years and posted more than 22,000 answers to technical support questions on Dell’s community web site. Stenski’s answers have been viewed more than a million times, saving Dell more than $1 million, according to Lithium. That prompted Forrester Research analysts Charlene Li and Josh Bernoff to call out Lithium in their social networking book, “Groundswell: Winning in a World Transformed by Social Technologies.”

A number of startups have moved to deliver similar social networking communities to the enterprise market. Marc Andreessen’s Ning social-networking platform can be used to build enterprise communities. Liveworld, Igloo, HiveLive and KickApps also promise companies that they can build thriving social networks. But Lithium has attempted to set itself apart by using game-like motivators such as leaderboards, rewards, reputations and profiles.

We mentioned the trend of using game-like features in non-game applications in our earlier story about Funware. In the Dell IdeaStorm voting, the most-frequent contributors can get “iSquared powers,” meaning they get ten times the voting power of other community members when it comes to selecting which of the IdeaStorm product ideas are the best.

“We’re managing sites for companies that collectively get a billion page views a month,” said chief executive Lyle Fong. “Our job is to get those one percent of users who are hardcore fans and turn them into the company’s biggest evangelists.”

Lyle Fong, by the way, is the brother of Dennis “Thresh” Fong, a professional video game player who won a Ferrari at age 20 when he was crowned the world’s best.

The boyish-looking Fong brothers of Los Altos are legendary in video games. Dennis dropped out of UC Berkeley to play video games for a living. He picked up honors as the world’s best “Doom” and “Quake” player. He was one of the first people to actually make video gaming a profession, winning big cash prizes and the Ferrari.

Dennis co-founded another company, GX Media, with Lyle. At first, they were selling gaming computers out of a dorm room. In 1997, they founded Gamers.com, a site that offered news and community forums for hardcore gamers, as well as game fan site FiringSquad.com, started with their other brother, Bryant. They raised $11 million in venture financing from CMGI in 1999 and lived the good life. Gamers.com even threw a party at the Playboy Mansion during an E3 show.

In 2001, Ziff-Davis bought Gamers.com and GX Media spun out Lithium Technologies under Lyle. Dennis went on to found Xfire, an instant-messenger service for gamers which was purchased by Viacom’s MTV for $102 million. Dennis is now head of the startup Raptr, a gamers social networking client.

Lithium is based in Emeryville, Calif. This second round of funding was led by Benchmark Capital. The cash will help the company expand its marketing and product development as it faces new kinds of competitors. The company previously raised a $9 million round from Shasta Ventures and Emergence Capital Partners in 2007.

One of the relatively few disappointments about the iPhone 3G unveiling at Apple’s WWDC event earlier this month was that there was no indication that the new phone would finally support Multimedia Messaging Service (MMS) messages. The fact that such an advanced phone can somehow not include this fairly standard functionality has been an annoyance of iPhone owners since day one.

A new rumor popping up just two weeks before the iPhone 3G launch suggests that could change.

An internal AT&T memo in circulation right now supposedly lists MMS messaging as a feature of the new iPhone, according to the iPhone news site iPhone Atlas.

Lending some credence to this rumor is the fact that AT&T still hasn’t officially announced its messaging plan for the iPhone 3G. We know that unlike with the first iPhone, 200 free text-messages will no longer included with basic plans. We’ve written that this is the true rip-off of the new iPhone (as opposed to paying more for the 3G data) on AT&T’s behalf because it will likely add at least $5-$10 on to your bill each month for a minimum amount of texts.

It’s pure speculation, but perhaps AT&T has unbundled the messages because of this new ability to send pictures and possibly video alongside text. Of note however, is that Apple’s website for the iPhone 3G still only make reference to SMS messaging, not MMS.

Also known as picture or video messages, MMS messages work just like Short Message Service (SMS) messages, but contain multimedia objects instead of simply text.

My old Motorola RAZR phone could handle MMS message just fine. So why that computer in my pocket, also know as the iPhone, can’t do so is beyond me.

The image above represents what many felt the original iPhone lacked. Apple has taken care of the 3G part and the third-party applications part, could MMS be next?

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[photo: flickr/Simon Davison]

A lot of people bought and unlocked the first generation iPhone to use all around the world. Apple chief executive Steve Jobs even made a joke about it during his WWDC keynote address.

Knowing this, Apple and AT&T are reportedly finalizing a way in which every iPhone sold in the United States would have to be activated with AT&T. In other words, there will be no unlocked iPhones sold in this country unless you don’t mind unlocking it and still paying AT&T a monthly service fee.

The rest of the world could be luckier however. Because Apple has deals with a different carrier in almost every country, it has had to agree to a wide range of prices and options for selling its iPhone 3G. It’s likely that in quite a few countries outside of the U.S., you’ll be able to buy an iPhone without a contractual agreement.

This non-subsidized iPhone would likely cost around $600, according to Piper Jaffray analyst Gene Munster.

$600 is a lot, roughly three times the amount the device will sell for when subsidized around the world. But it’s also the price of the original 8 gigabyte iPhone. Plenty of people had no problem paying that a year ago, so will they now do the same to unlock the new phone?

Munster believes that some will — especially in Europe — but that it won’t make up a huge percentage of sales worldwide. While 1 million of the estimated 3.6 million iPhones sold in Europe this year may be sold as “pre-paid,” worldwide those numbers will be only 2.7 million pre-paid out of 12.9 million sold. Again, these numbers are based on sales estimates.

In North America, which one can assume will not include the United States, since Apple and AT&T have given no indication that they will sell an iPhone without a contractual agreement, the number of pre-paid iPhones sold is expected to be 1 million out of 8 million total units.

Apple is said to be getting between $325 and $425 from AT&T for each iPhone 3G sold at the $199 to $299 subsidized price in the United States.

More impressive is that the estimates from Gartner and Piper Jaffray have the iPhone controlling 17 percent of the worldwide smartphone market by the end of 2009. In North America, they expect that number to be closer to 30 percent.

Find the full chart with the estimates below.

[photo: Duncan Rawlinson]

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When word started to trickle in that the iPhone 3G would sell for a mere $199, many people simply could not believe it. It seemed too good to be true. Many questioned why Apple would make such a move when the device was already going to sell like crazy at the $399 price point.

Well now we may know. AT&T is reportedly paying Apple $325 for every single iPhone 3G sold.

Perhaps even crazier is that it is paying Apple $425 for each iPhone 3G sold to a new AT&T customer. There are likely to be a lot of those.

This subsidy is thought to be some 50 percent higher than other smart phone manufacturers get for their devices, according to Oppenheimer researcher Yair Reiner.

But let’s also remember: Apple is no longer receiving a cut of each monthly iPhone bill from AT&T. This means that Apple is likely going to make about the same amount of money that it did per iPhone in the last round, only now it’s getting all the cash up-front.

One might think this is meant to protect Apple from the unlocked iPhone epidemic that swept the world this past year, but all indications are that Apple and AT&T are now taking more stringent steps to ensure that no one can buy and use an iPhone without activating it first.

Still, you can be sure enterprising hackers will quickly figure out a way around this. Where there’s a will, there’s always a way.

Are you going to buy an iPhone 3G on July 11, launch day? If so, how long are you prepared to wait?

A bit of information that started circulating after the WWDC launch of the iPhone 3G was that AT&T and Apple would now require buyers to activate their new phones before they left the store. The thought is that this would help curb the rather large problem the companies had during the first generation of the product with people buying the device, never activating it, and instead unlocking it to use on other networks — and often in other, non-supported countries.

While some people expressed displeasure over this heavy-handed move to ensure carrier lock-in, the other very real problem with this idea was that it would make the lines on the iPhone 3G launch day exponentially longer.

Even in best-case scenarios, in-store activation would add at least 10-15 minutes to each purchase, and that’s if the process runs like a well-oiled machine. “Launch day” could quickly turn into “launch week.”

But new reports indicate that this might not be the case. A leaked internal AT&T Mobility memo suggests that users might be able to pick a new plan and sign an agreement online prior to launch day and then show up with a code they are given to buy the new iPhone.

Another possibility is that the stores could allow you to buy the iPhone 3G, sign the 2-year agreement with AT&T and then go home to actually activate the phone. This would work because Apple or AT&T (depending on who you buy from) would note the device’s IMEI number to keep track of all iPhones sold, according to Mobile Magazine.

Both of these ideas go against what Ralph de la Vega, president and chief executive of AT&T Mobility, said following the recent unveiling of the new phone. “The way that these phones are going to be sold is that they are going to be activated in the stores,” de la Vega said.

So which is it? We’ve contacted Apple for clarification, but the company is still keeping silent on the process for the time being.

If customers will have to activate all iPhones in-store, I’d bring a book to launch day — or several. Otherwise it should be relatively smooth sailing like last year.

[photo: flickr/TheQ!]

While everyone throws a fit over Apple and AT&T’s tricky pricing for the iPhone 3G, the real travesty in pricing is slipping by largely unnoticed: AT&T is including no text messages in its iPhone 3G monthly plans.

This means that on top of your cellular plan, and on top of your new 3G data plan, you will need to purchase a text messaging plan. This is a rip-off of epic proportions.

Lets think about this for a minute. What is a text message? It’s a relatively tiny amount of data (160 characters or fewer) that is sent using the short messaging service (SMS). With the iPhone’s unlimited data plan, which includes everything but texting, you’re probably sending hundreds of megabytes, and soon gigabytes, of data each month for $20-$30. Yet to send 200 of these 160-character text messages, it will likely be $5 to $10 extra a month.

A text message is data, and a very small amount of it. So why am I paying so much extra — let alone anything extra for it?

This seems like it would be a perfect candidate for one of those “Fleecing of America” segments that run on the NBC Nightly News — except that it’s arguably worse in the rest the world. Of the 2.3 trillion text messages are expected to be sent this year, the United States represents a relatively small percentage with “only” 300 billion sent. Not surprisingly, China is the largest market for the messages, with well over 500 billion sent. Mobile companies are making billions of dollars off of these messages.

Even worse is that carriers effectively double charge for each message. They charge both the sender and recipient of each one. In the United States these messages usually cost around 10 cents per message but can go as high as 25 cents a message without a pre-paid plan.

If you’re anything like me, you’re going to use many more than just 200 messages included in a bare-bones plan. Like many first generation iPhone owners, I signed up with the default 200 messages that were included in the original plans. One month I overshot this by 350 messages, and I would hardly consider myself a heavy text messenger.

But the iPhone seems to do that. Just as it has spurred use of the Internet on mobile phones, the iPhone has made text messaging very appealing to me. One reason is that I actually have a keyboard now instead of using that bogus T9 typing mechanism all of my previous phones had. And the other is that Apple makes text messaging look just like its iChat application, with conversations threaded just like an IM.

I use text messaging on the iPhone now just like I use IM. This is a major problem when I only have 200 messages I can send or receive — and each one after that is 10 cents a message. I upgraded my plan to 1500 messages, but under this new iPhone 3G payment structure, this is likely to add around $20 to my monthly bill. Everyone is all up in arms over the $10 raise for 3G data plan, what about the extra $20 many of us are going to have to pay?

Perhaps one of the companies building applications will come up with a way to circumvent this ridiculous charge for text messages. During Apple’s SDK road map event, AOL was unveiled as partner to bring its AOL Instant Messenger program to the iPhone, but we didn’t hear anything about it at WWDC. Hopefully that is still in the cards, because it could be exactly what I’m looking for — assuming that Apple’s new Push Notification Service works as well as advertised.

Instant messaging on phones with unlimited data plans such as the iPhone could easily kill text messaging. And it should, because I don’t want to keep paying for unlimited data only to have it be limited to certain kinds of data.

Text messaging almost makes the mobile industry’s other scam, the ringtone, look like a deal. And it makes that $10 a month extra on your iPhone bill for 3G data look like a steal.

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[photo: flickr/brymo]

I can’t begin to tell you the number of emails and comments I’ve received since yesterday from people saying that the $10-a-month price increase in the data plan for the iPhone 3G will actually make the device more expensive over the course of its life. Some people were even nice enough to send me detailed numerical breakdowns to highlight the difference. I am well aware of this difference.

That’s exactly why I wrote a post asking about the data plan price (before the details were revealed) while I was still sitting in the WWDC keynote room yesterday after the event had wrapped up — I had a feeling Apple and AT&T would do something like that. It’s simply a smart move.

Let’s have a little discussion about perception versus reality.

Though many tech watchers are quick to realize what this monthly rate increase means, most of your average consumers will not realize this — and further, will not care. For them it’s about one thing: that $199 price. That can probably be traced to impulsiveness or rationalization, but for many, it will simply be reality.

Think of it this way: Compact fluorescent light bulbs (those twisty kind you’ve probably seen), save everyone who use them money over the course of their life versus regular light bulbs. The savings, thanks to lower electricity consumption, is usually many times over the price difference. So everyone uses them over regular light bulbs right?

Wrong.

A small percentage of people do. Why? Because they are more expensive up front to buy. Consumers see the up front cost and either don’t realize it’s in their interest to buy the blubs to save money long term, or simply don’t care about the long term.

Another example: The PS3 sold slowly when it was first released. Why? Because it was $600. Yet, even at $600, at the time, it was one of the cheapest Blu-ray players out there — and it also had arguably the most advanced gaming system attached to it. If you were in the market for both, it was actually a good deal.

But even for those not in the market for both, just compared to the Xbox 360 it was arguably a good deal. The 360 at the time was some $200 cheaper — but it had back-end costs to get to arguably its most useful feature: Xbox Live. You needed to pay $99 a year to access the full Xbox Live, and so over just two years, that price difference between the PS3 and 360 would be negated. Over the course of the products life, assuming you kept it for more than two years, you’d be paying more for the Xbox 360. (The PS3 does not charge to access its online system.)

And to look at this example one final way, when Microsoft released the Xbox 360 Elite for $480 to combat some of the PS3’s high-end features (HDMI, etc), reality became distorted even more. Sure, the Xbox 360 Elite was $120 cheaper than the PS3, but if you wanted to get next generation DVD playback on the 360, you stil needed by buy the HD DVD add-on, which at the time was another $200. This made the truly comparable 360 system actually $80 more than the expensive PS3. Again, the PS3 had its Blu-ray player built-in.

There are countless other example of these up-front costs versus back-end costs. Is it companies tricking consumers? Sure. But it’s also a very smart business move.

Apple and AT&T are going to sell a lot more iPhones at $199 versus $399 — even though the device will likely end up costing consumers more in the long run. Consumers flock to the quick deal rather than the long term bargain. They always have and always will.

Further, you could argue that it’s not really even Apple who is to blame here. A lot of people are quick to jump on Apple chief executive Steve Jobs for hypnotizing the crowd and making us all look past the reality of a more expensive device. In reality, Apple is no longer making money off of AT&T’s monthly contracts, that agreement has changed.

Instead, AT&T is paying Apple a subsidy for each iPhone sold and activated (and now they all must be activated in the store), to make up for the difference in bringing the price down from $399 to $199. While all of the details on this agreement are not yet known, it appears that it is AT&T and not Apple that is making this extra cash off of the contracts.

Of course Apple is going to benefit from this lower price as well, it will sell more units, and that is why it is playing up the new $199 price. But again, that’s just smart business.

It’s okay to complain about this iPhone price drop that really isn’t a price drop. Good for you if you realize this. But just remember that most consumers will not realize this and further, will not care to realize this. They just want to walk into a store and buy an iPhone for $199. True costs be damned.

I’m fine with what I see as the reality: the iPhone 3G is the upgraded version of the best mobile device I’ve ever owned — by far. It’s going to be just about the same price as the original version. Sold.

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[photo: flickr/cosmic kitty]

Now that I’ve had a change to sit down, relax and digest the news that Apple unveiled at its WWDC conference today, I thought it was a good time for a post-show follow-up piece. Whereas Dean has the post-keynote blues, I’m quite happy with what we saw today. Was it everything I ever wanted and more? No. But it was a solid event that showcased Apple as the force to be reckoned with in the mobile world going forward.

To me, the event was a success because of three simple numbers: 1 - 9 - 9, as in $199. When word first broke about the possibility that Apple would release an iPhone for that price, many people’s assumption was that it would be the price of the current generation of the iPhone once the new one came out. When reports kept coming in about this price for the 3G version of the device, many simply assumed it was false information. It was not. The iPhone 3G will be $199 (the 8 gigabyte version anyway). This is huge news.

A lot of people will still complain that it is restricted to the AT&T network in the United States. Would it be better if the device were available on any service? Of course. But at the end of the day it was a great business move by AT&T to score this deal. Verizon had a chance. It blew it.

More people will complain that you need to sign a two-year agreement to get one. Again, sure, it’d be better without this, but this is the real world. To me this $199 announcement today is gravy compared to last year when I could not believe the original iPhone would be $599 even with a two-year contract with AT&T. That was quite ridiculous — and, still, many of us took the plunge.

The $199 iPhone 3G is simply going to be a massive seller. In the past year I can’t recall even a single person who saw my iPhone that said they didn’t want one. Nearly all of those people simply had two barriers to entry: price and the knowledge that a faster version would be coming. Both of those situations are now remedied.

And remember, it’s not just in the United States that the iPhone 3G will go on sale at that low price; it’s in places all over the world. Is there any doubt remaining that Apple will smash through its 10 million units sold goal by the end of the year? The only thing that could hold it back is if there are production shortages. Who knows, maybe the industries that make black and white polished plastic will go under.

At the end of the day, we got what we wanted from the new iPhone: access to the faster 3G network, GPS capabilities, native 3rd party applications and a killer price point. The stuff we didn’t get: a better camera, cut & paste functionality and maybe video capabilities. These are either negligible or perhaps even fixable via a software update.

My only real concern is that it remains to be seen if Apple’s Push Notification Service as a replacement for applications running in the background will be a good one.

In terms of the other announcements at the event, it was pretty much on par with most modest predictions. It’s easy to forget sometimes that this event is first and foremost for developers after all. It wasn’t very likely that we would see some kind of new Mac Tablet computer or some sexy new Apple TV update.

It would have been nice to see a bit more about OS X Snow Leopard — or okay, anything about OS X Snow Leopard. (Apple demoed it to developers after lunch, but not to most of the press.) But one reason they probably didn’t is because it won’t be all that different from OS X Leopard and the crowd would have inevitably been unimpressed. It’s also a year away from release.

MobileMe looks good, but I’m still not sure about paying $99 to get some service that Google and others offer online for free. If the syncing is as seamless as they make it seem, I’m probably in; otherwise I’m content to let others use this just as I was with .Mac.

A lot of the 3rd party applications look very nice, but I think this is an area that will only get better with time. The ones that particularly excite me are the games and the location-based apps (Loopt was the one that was shown). I really believe this iPhone 3G with its combo of the Wi-Fi/Cell triangulation and now with GPS will lead to an explosion of location-based applications that are actually useful. Social networks like Whrrl (and I’m sure eventually Facebook and the others) and local review sites like Yelp, will be just a few game changing uses.

I cannot wait for a location-aware version of Twitter — but I’m sure Twitter will make me wait.

In terms of the enterprise announcements, I’m happy for all of my business friends who wanted an iPhone but company policy wouldn’t allow them to get one. Overall though, this simply doesn’t apply to me so I have a hard time getting excited about it.

In conclusion, I’m very pleased with what we saw today from Apple. Hell, it could have had Randy Newman singing/rambling for the entire event (as it seemed like he did at MacWorld) and as long as the iPhone 3G was announced, and that it was going on sale for $199, I would have been happy.

Like many others, my disappointment is in the month-long wait ahead — but I knew that was coming. It will give me time to figure out what I’m going to do with my current iPhone. I already have one offer on the table, but the new $199 price point isn’t giving me much bargaining power.

It’s going to be a cold, dark, lonely and slow month on the EDGE network.

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As more 3G iPhone rumors pour in, I still believe the most audacious one is that the device will be sold for $199. I, like many others, have a hard time believing that Apple and AT&T would give us all such an incredible deal when it could just as easily keep the price in the $400-range and still sell a massive amount. However, the rumors persist and simply must be taken seriously.

We already knew about the first report from Fortune, and another tip given to Wired a few days ago backed that up. Digg founder Kevin Rose (not always the most reliable source for these rumors) released a video claiming he heard that Apple would have an iPhone for $200 as well. However, the most telling information may be coming from overseas, where they are perhaps not quite as tuned in to the rumor cycle of the United States.

Telefonica SA is going to be the sole distributor of the iPhone in Spain, according to Thomson Financial News. And Thomson Financial has also said the device will be sold for under 100 euros. 100 euros is approximately $150 U.S. — and the 3G iPhone is going to be sold for less than that? How is that possible? Well, just as it would be in the U.S., through a subsidy by the distributor.

In the U.K., meanwhile, the 3G iPhone will cost 100 pounds with an 18-month contract, according to Macworld UK. That is approximately $195 U.S. — nearly identical to the rumored $199 selling price of the 3G iPhone stateside. There is also talk that the device could be given away for free in the U.K. if customers sign up for the most expensive contract — or, get this, if they trade in their first generation iPhone.

Certainly what Apple does with the device overseas (where it hasn’t sold quite as well) doesn’t mean it will do the same stateside, but having a huge $200 or more price disparity would be pretty odd.

I’m not saying that we’re definitely going to see a $199 3G iPhone, but there is simply too much information out there to rule it out.

It’s still not entirely clear why Apple would agree to such a steep discount, but perhaps losing some market share to Blackberry last quarter convinced the company to allow AT&T to subsidize the iPhone just as it subsidizes all of its other phones. Remember, AT&T makes much more off of contracts than it does off initial phone hardware sales — and a $199 iPhone would bring AT&T a massive amount of new contracts.

We’ll know for sure in a few days. At least we know that if the device is released with the subsidy, current iPhone owners (like me) will be able to take advantage of it as well.

[photo: flickr/codepo8]

We’re now two weeks away from Apple chief executive Steve Jobs taking the stage at the company’s Worldwide Developers Conference (WWDC) to give the keynote address. It’s pretty well accepted that the big announcement at the event will be the launch of the 3G iPhone, but Jobs does love his wild cards — could there be something else in the works as well?

An event with a 3G iPhone and the launch of the 2.0 software for the device wouldn’t need anything else — I foresee a lot of talk about amazing native applications built with the software development kit (SDK) — but if Jobs really wanted to make jaws drop, here are a few possibilities:

A smaller, cheaper second version of the iPhone. Think of this as perhaps an “iPhone Nano.” There is a lot of speculation that AT&T may subsidize the new 3G iPhone all the way down to $199 — but most analysts and experts are in agreement that it really doesn’t need to; the thing will sell like hot cakes even at $399. There are also some interesting questions this raises. Such as, if the sign-up process is once again online through iTunes, will users be getting $200 rebates after the fact?

Instead, what if Apple had a second version of the phone it intended to sell at the lower price point? Maybe this version would be a bit smaller than the current one and would lack some of the functionality, such as video streaming (if that is included in the 3G iPhone). This talk of a cheaper, smaller version of the iPhone has been around for about a year now, but nothing has come of it — yet.

A tablet Mac or new version of the Newton PDA device. While there are multiple rumors that Apple is working on such a device, a launch alongside the 3G iPhone is probably very unlikely. Still, imagine a larger version of the iPhone that was a full-powered computer. Maybe it has a 3G chip built in as well, but also has USB ports and even more advanced multi-touch capabilities. Some are betting on a launch of such a device this fall, others say 2009, but wouldn’t this just make a killer “One more thing…”?

Would anyone still want a Kindle? What about an Ultra-mobile PC (UMPC)? Did anyone want one of those to begin with?

A new Apple TV. While the Apple TV got a software upgrade and price cut at MacWorld in January, the box itself didn’t actually change. With increased pressure from the likes of Netflix and its Roku-built set-top box, this could change.

Apple hasn’t significantly updated the Mac Mini in years. (I would even say that it has never gotten a significant upgrade since its launch over three years ago.) What if Apple merged the Apple TV and the Mac Mini for the ultimate living room device?

Full computing capabilities, an optical drive, the ability to act as a digital video recorder (DVR) — yeah, I’d buy one in a second.

A revamped iTunes. While most people will focus on new gadgets, Apple is said to be working with the record labels on some new deals that could alter the iTunes store. Certainly the ability to buy music and ringtones any time and any place on the 3G network seems like a no-brainer. But what if Apple goes really wild and launches a subscription-based version of iTunes?

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We’re nearing the mark for when the 3G iPhone could become a reality. The device, which is now widely expected to be announced at Apple’s WWDC event on June 9th and launched shortly thereafter, already apparently has people waiting in line in New York — perhaps a month before it’s released. Excitement is high and rumors continue to flow.

While the first iPhone had a huge impact on the mobile market, the 3G version could be even bigger. Many indications are that the device will launch in a significant portion of the world shortly after CEO Steve Jobs unveils it. Armed with 3G technology to enable faster data speeds (as some contend the iPhone should have had from the beginning), the iPhone should become a major player worldwide.

Here’s some of the latest news circulating on the device today:

The 3G iPhone to top out at 42 Mbps?

A senior executive for Telstra, a carrier that will carry the iPhone in Australia, allegedly told Channel News that by the end of 2008 the 3G iPhone will be capable of download speeds of 42 megabits per second. That is faster than almost all broadband Internet connections.

While there has been a lot of talk about Apple including a 3G chipset in the iPhone that is capable of speeds faster than most of what is out there right now, most expect these speeds to top out at 7.2 Mbps, far from the 42 Mbps speed. So unless Apple has some kind of special iPhone with a souped-up 3G chip and network headed for Australia, these claims should be “all but impossible” to achieve.

AT&T won’t confirm the 3G iPhone, but talks price — or lack thereof

“There’s not been a product announcement. There hasn’t been any pricing decisions made. That’s yet to come,” AT&T chief financial officer Rick Linder said while speaking at a summit