About a month has passed now since the announcement of the iPhone, and I think enough information has leaked out of the Jobs' Reality Distortion Field to begin to talk rationally about what it is and what it isn't.
The iPhone is the next gen iPod. It is first and foremost a media device, capable of listening to music, watching movies, pictures, etc. It will be less effective at the music portion than an iPod, but will be much better at video than the current generation of iPods.
It happens to have phone and internet features added as well, but don't mistake it for being a smartphone, ala a Treo or Blackberry. The iPhone can make calls, and you can browse the internet, but that isn't what this device is about.
Smartphones are primarily used by so called 'business users'. People who use the device to track their schedules, communicate via emails, and track information specific to their industry or organization. They also use their phone all day long. The iPhone is not targeted at these users.
I'm not exactly sure who the target audience is for the iPhone. The price of the iPhone $499 or $599 with a 2 year contract is pretty expensive. An iPod nano of the same capacity sells for $199 and $249. That leaves a $300 premium for the phone and video features. Cingular sells the Palm 680 smartphone for $199 with a contract. Price however is just part of the story.
The iPhone, just like the iPod, has no removable battery. This may be acceptable in a device that simply plays music, but in a phone that plays videos, accesses Wi-Fi and cellular networks, and also plays music, it just doesn't cut it. Apple claims a battery life of 5 hours when watching video or using the network. For an active business user, or even someone on a trip, this just doesn't cut it.
Also, I'm very curious to see how the touchscreen keyboard works in real life. I'm a big fan of tactile feedback in my devices, as it allows me to use them without looking where I'm typing, etc. Palm did an excellent job to make the Treo navigable using one hand (using the 5-way button). When you need to type you use two hands (or thunbs really), but to navigate the menus, applications, etc, the 5-way works great one handed. Also, as winter slams us this February, I wonder how will the touch screen will work with gloves (if at all). Again, the Treo works (well enough) with gloves to keep my hands from getting frostbitten.
Also, Apple chose to use the relatively slow EDGE network instead of the CDMA EVDO network, or Cingular's own 3G network. For a communication device, this seems to be an odd choice. Apple is obviously choosing to focus on the multi-media experience over the phone experience.
Finally, they have a long term (5 years?) exclusive agreement with Cingular. Maybe I'm just lazy, but I don't plan on switching my cellular provider just for a chance to own a specific phone.
Apple has had some amazing successes. Their Powerbook laptops are second only to the (now defunct) IBM Thinkpads. iPods of course are second to none. However, Apple isn't foolproof either. The Newton, the Cube were both aggressive failures. However, even if the iPhone's first version does fail, it is hardly down for the count. Apple can and will innovate, and with their existing iPod market domination, they will have several chances to make this concept successful. I'll be tracking how this develops (from my Treo).