Honeymoon Ends For iPhone As Realities Set In

Tricia Duryee
Friday, July 31, 2009 3:00 PM

Apple's iPhone has been able to do no wrong. For two years, it monopolized the industry and has been upheld as the best smartphone out there. Consumers, developers and technology bloggers were enamored.

But in an almost indescribably turn of events this week, the tides shifted and the platform's problems?that have always been there?started eating away at its super smooth touchscreen exterior. It seems that in more numbers than ever, consumers are speaking out against AT&T's network problems and developers are complaining about Apple's and AT&T's inconsistent policies on which applications get approval. That in turn, created more unhappy customers.

So, we ask, is the honeymoon over? Evidence points to another handset?the Palm (NSDQ: PALM) Pre or one of the many Android devices?getting time in the spotlight.

If indeed the iPhone begins to fade over the next few months, we can trace it back to this week and one event alone. Who knew there would be one catalyst, and the tipping point was going to be the rejection of Google's Voice application?

Clearly, it wasn't just AT&T's network problems. They have been well documented for months, and it seemed dropped calls alone wasn't keeping many from owning the device (well, perhaps other than GigaOm's Om Malik very public ditching of the device). This week, what got everyone upset is the rejection of Google Voice, which gives you one number and one voicemail box for all of your phones. The problem is that in order for it to work well, you need an app. Among other reasons, when you call someone, the person receiving the call won't see your phone number?in today's caller ID world, that's not going to fly.

The rejection turned into a media firestorm. Blame was placed on AT&T, then on Apple, and then back on AT&T (NYSE: T). You'd be hard pressed to find any sort of official statement to clear up the matter. Simply put, the application was rejected because it "duplicates features that come with the iPhone."

That's when people got mad. Really, really mad. TechCrunch's Michael Arrington wrote today that he's quitting the iPhone. "It wasn't the routinely dropped calls, something you can only truly understand once you have owned an iPhone (and which drove my friend Om Malik to bail). I've lived with that for two years. It's not the lack of AT&T coverage at home. I've lived with that for two years, too. It certainly isn't the lack of a physical keyboard, that has never bothered me. No, what finally put me over the edge is the Google (NSDQ: GOOG) Voice debacle." Arrington says he'll pay the early termination fee, and jump over to T-Mobile's myTouch, a Google Android device (surprise, it has Google Voice).

Then there's Steven Frank, the well know Mac developer, who co-founded Panic. He wrote on his blog this morning that he's furious with Apple and AT&T. "Let's talk quickly about Google's official client app for Google Voice. It's not the only thing I'm mad about, but it was the final straw?.I've reached a point where I can no longer just sit back and watch this. The iPhone ecosystem is toxic, and I can't participate any more until it is fixed. As people have told me so many times: It's Apple's ballgame, and Apple gets to make the rules, and if I don't like it, I can leave. So, I don't like it, and I'm leaving." Frank will be buying a Palm Pre.

I doubt the average consumer is up in arms over this one debacle, right? So maybe Apple can let this one slip by unnoticed? Sorry, Apple (NSDQ: AAPL). Not so fast. Arrington and Frank are influencers. If they bail, others might follow.

One thing that's easy to forget is that it's extremely early days in the wireless industry. The iPhone has a paltry global marketshare of 1.9 percent, according to Strategy Analytics. So, does this spell the end for Apple? No. This is reality. The battle for the dominant smartphone will be long and drawn out. One platform won't be a break-away winner overnight. Developers and consumers will flip-flop, and it will be a very competitive landscape for all handset makers.


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