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Apple iPhone's Deeper Problem

It's been nearly a week since Apple (AAPL) issued its controversial iPhone 1.1.1 firmware update, but the full repercussions are only now being felt.

At first, the loudest cries came from users who had unlocked their phones to work with other carriers and found that the devices had been rendered inoperable -- a loud but relatively small minority.

But Apple's deeper problem is that the update also disabled all native (i.e. unauthorized) third-party applications -- a development that will ultimately affect every iPhone user. Third-party applications are the secret sauce that have made every computer -- from the Apple II on -- infinitely more powerful than its designers imagined. Who besides a programmer on Apple's payroll is going to write software for the iPhone now?

The move was especially surprising because an Apple executive -- VP of hardware product marketing Greg Joswiak -- only a few weeks earlier had signaled in an interview with PC Magazine editors that the company wasn't hostile toward native iPhone apps. The money quote from the magazine's GearLog blog:

Rather, Apple takes a neutral stance - they're not going to stop anyone from writing apps, and they're not going to maliciously design software updates to break the native apps, but they're not going to care if their software updates accidentally break the native apps either. He very carefully left the door open to a further change in this policy, too, saying that Apple is always re-examining its perspective on these sorts of things. (link)

Not surprisingly, many developers saw that as a green light to start their business plans. One company, Mexens Technologies, maker of the popular Navizon software that triangulates your position and displays it on your cellphone, is now offering $25 refunds to anyone who bought the version it had just started selling for the iPhone.

Mexens execs might well wonder why Apple went out of its way to warn unlockers that last week's firmware update might wreck havoc with their hacks but didn't offer the same courtesy to the purveyors -- or users -- of third-party apps. It's also a mystery why, as the New York Times reported, Apple is treating some iPhone owners with third-party app problems with the same contemptuous no-help-from-us policy they are using for users who tried to break the iPhone's lock-in with AT&T (T).

Apple spokeswoman Jennifer Bowcock certainly won no friends for Apple when she told the Times' Katie Hafner:

"If the damage was due to use of an unauthorized software application, voiding their warranty, they should purchase a new iPhone." (link)

Little wonder that Nokia is going after Apple with its "phones should be open to anything" advertising campaign, or that Gizmodo changed its iPhone recommendation from "wait" to "don't buy," or that there is a movement afoot to punish Apple with a class-action lawsuit.

Below the fold, the devastating YouTube video, available here, that uses Apple's own "Think Different" soundtrack to memorialize the end -- perhaps permanent -- of the era of native third-party iPhone apps. As usual, Danny Lyons has the last word on that subject here, in The Secret Diary of Steve Jobs.

Safari Gains Ground in Browser Wars

Apple's (AAPL) Safari made the biggest gains in September among mainstream Web browsers, according to new research released today by Net Applications Inc.

Although Microsoft's (MSFT) Internet Explorer still dominates the category, Safari's market share rose nearly 7.7% for the month and now represents better than 5% of the traffic on the Internet. Firefox's share rose slightly (2.15%) and now carries nearly 15% of the traffic. Explorer continued its slow fall, drifting down more than 1% for the month.

Net Applications samples browser data from visitors to a network of some 40,000 websites around the world, a method that tends to skew results toward computers that are heavily used and away from those that are gathering dust.

The most impressive growth in the latest numbers was the nearly 17% jump in "other," a category that includes such browsers as Opera, Netscape, Opera Mini, Mozilla, Danger Web Browser, Konqueror and PlayStation Portable Internet Browser.

The following table, derived from Net Applications' research, summarizes their results. For more detail, you can go to their website here. For a report on their operating system numbers, see Mac Installed Base Hits 6.6% in September.

Mac Installed Base Hits 6.6% in September

The installed base of Apple (AAPL) computers rose nearly 6.7% in the month of September to 6.6% of personal computers, driven largely by a one-month 12.7% increase in Intel-based Macs, according to market research released today by Net Applications Inc.

During the same period, machines running Microsoft (MSFT) Windows actually lost share, despite a sharp one-month growth in Windows Vista numbers.

Net Applications samples operating system data from visitors to a network of some 40,000 websites scattered around the world, a method that tends to skew results toward computers that are heavily used and away from those that are gathering dust. It is less a measure of market share than of active installed base.

By Net Applications' reckoning, more than 90% of the computers on the Internet are running some flavor of Windows while 6.6% are running a version of OS X. Nearly 3.4% are categorized as "other," which includes 0.81% Linux and 0.07% iPhone (up from 0.05% in August).

Among mainstream operating systems, Vista was the fastest-growing, up more than 15% for the month, although Windows' numbers overall were down slightly. 

Linux and iPhone both showed double-digit gains, up better than 18% and 28%, respectively. The iPhone data were taken too early to reflect the effect of the software update last week that rendered unlocked phones inoperable.

The table below, derived from Net Applications' research, summarizes its August and September results. For more detail, you can go directly to their website here. For their web browser numbers, see Safari Gains Ground in Browser Wars.
 

Apple iPhone a No-Show in Paris: UPDATE

UPDATE: Under the headline "EXCLUSIF Orange et Apple au bord de la rupture" the French weekly Challenges reports on its website today that Apple (AAPL) and France Télécom (which owns Orange) have indeed come to loggerheads. At issue in negotiations that have been going on for three weeks, according to unnamed sources, are Apple's steep revenue-sharing demands -- as much one-third of sales and monthly fees.

Complicating the talks are France's telecom laws, among the strictest in the world, which forbid the sale of a service with another product -- a cellphone with a telephone subscription, for example. The cellphone subsidy system most carriers use allows them to circumvent the rules. But Apple -- unlike other phone manufacturers -- does not offer a subsidy. Orange might thus be forced by French law to sell a working iPhone -- with a service contract -- for the same price as a "naked" one.

Unless a settlement can be reached by the middle of next week, according to Challenges, Orange -- and Apple -- might not be able to get the iPhone on French store shelves in time for the big Christmas selling season.

- - - - - -

Despite the confident predictions that Apple would announce something in Paris on Sept. 20 -- or Sept. 24, at the latest. Despite the 70,000 Parisians and other visitors expected this week at Apple's largest trade show in Europe. Despite the fact that France Télécom CEO Didier Lombard told a reporter in Hanoi last week that he and Apple had a deal (which led InformationWeek to run a headline that read Apple's iPhone is Launched In France, Via Vietnam.)

Despite all this, Steve Jobs is not at the 2007 Apple Expo in Paris and neither is the iPhone. And it now seems likely that the annual trade show, which opened on Tuesday and ends on Saturday, will come and go without a word from either Apple or Orange about their plans to roll out the iPhone in France. (Requests for comment from Apple have not yet been answered.)

"Could it be," writes Victoria Shannon in today's International Herald Tribune, "that there actually is no deal with Orange, which is owned by France Télécom?"

Shannon's piece explores several speculative theories -- including possible pique in Cupertino over passage last year of France's so-called iPod Law -- before settling on what is likely the real explanation:

It is probably that Apple and Orange simply have not yet come to terms on their business relationship over the iPhone. Maybe Orange is not willing to share as much revenue with Apple as O2 and T-Mobile are for the cachet of being the exclusive iPhone operator. (link)

Meanwhile, lacking an iPhone to pin it to, France's MacGeneration ended up bestowing its best-of-show award on the iPod Touch.

And although there were no iPhones on display at the big Apple booth that occupied center stage at the show, there were plenty to be seen on the floor of the Expo and on the boulevards of Paris, according to 9to5Mac:

If you come to Paris with an iPhone, don't expect anyone to be impressed.  Many have seen hundreds of them.  Every single one we've had the opportunity to inspect has been hacked. (link)

[Photo courtesy of 9to5Mac.]

iPhone Update: The Good News

Almost lost in the cries of pain and dismay from users who "bricked" -- temporarily or permanently -- their iPhones by installing Apple's (AAPL) September update onto devices that had been unlocked, modified or activated on a Windows machine (see Techmeme this morning for the ugly details) is what the update does for the vast majority of users.

The summary of new features provided by the company includes several improvements people had been calling for from iDay one:

• iTunes Wi-Fi Music Store
• Louder speakerphone and receiver volume
• Home Button double-click shortcut to phone favorites or music controls
• Space bar double-tap shortcut to intelligently insert period and space
• Mail attachments are viewable in portrait and landscape
• Stocks and cities in Stocks and Weather can be re-ordered
• Apple Bluetooth Headset battery status in the Status Bar
• Support for TV Out
• Preference to turn off EDGE/GPRS when roaming internationally
• New Passcode lock time intervals
• Adjustable alert volume

Apple has provided a cheery video in which several of the new features are demonstrated by the same actor who did the original iPhone guided tour. Anybody with a nonfunctioning phone will probably find it too painful to watch.

As many commentators have noted, it's not as if Apple didn't warn users who had unlocked their iPhones that update 1.1.1 could render the devices inoperable. What it didn't tell its user community was that the update might also disable hundreds of third-party applications that independent programmers had written to make the device more useful.

Some of these problems may go away in the weeks ahead.  Jailbreak will probably get updated to allow third-party apps to be reinstalled. The creators of iPhoneSimFree and anySIM may figure out how to repair whatever damage they might have caused to iPhone's firmware.

Repairing relations with the fiercely loyal core of its user base may take Apple a little longer.

Apple iPhone a No-Show in Paris

Despite the confident predictions that Apple (AAPL) would announce something in Paris on Sept. 20 -- or Sept. 24, at the latest. Despite the 70,000 Parisians and other visitors expected this week at Apple's largest trade show in Europe. Despite the fact that France Télécom CEO Didier Lombard told a reporter in Hanoi last week that he and Apple had a deal (which led InformationWeek to run a headline that read Apple's iPhone is Launched In France, Via Vietnam.)

Despite all this, Steve Jobs is not at the 2007 Apple Expo in Paris and neither is the iPhone. And it now seems likely that the annual trade show, which opened on Tuesday and ends on Saturday, will come and go without a word from either Apple or Orange about their plans to roll out the iPhone in France. (Requests for comment from Apple have not yet been answered.)

"Could it be," writes Victoria Shannon in today's International Herald Tribune, "that there actually is no deal with Orange, which is owned by France Télécom?"

Shannon's piece explores several speculative theories -- including possible pique in Cupertino over passage last year of France's so-called iPod Law -- before settling on what is likely the real explanation:

It is probably that Apple and Orange simply have not yet come to terms on their business relationship over the iPhone. Maybe Orange is not willing to share as much revenue with Apple as O2 and T-Mobile are for the cachet of being the exclusive iPhone operator. (link)

Meanwhile, lacking an iPhone to pin it to, France's MacGeneration ended up bestowing its best-of-show award on the iPod Touch.

And although there were no iPhones on display at the big Apple booth that occupied center stage at the show, there were plenty to be seen on the floor of the Expo and on the boulevards of Paris, according to 9to5Mac:

If you come to Paris with an iPhone, don't expect anyone to be impressed.  Many have seen hundreds of them.  Every single one we've had the opportunity to inspect has been hacked. (link)

[Photo courtesy of 9to5Mac.]

Apple Expo in Paris: Where Are the iPhones?

Apple (AAPL) opened its 2007 Paris Expo yesterday, and although we're seeing photos from MacNN and 9to5Mac and hearing bits of news from Microsoft (MSFT) and Iomega (IOM), there is, surprisingly, no sign yet of an iPhone. This despite the fact that Didier Lombard, CEO of France Telecom, told Macworld's Jonny Evans last week that the carrier had already been tapped to be Apple's cellular presence in France.

Apple has not yet responded to requests for guidance. If you're at the show in Paris and hear any buzz about a French iPhone, please drop us a line.

[Photo courtesy of MacNN.]

Amazon vs. Apple: Why Are the Songs So Cheap?

On hearing the news that Amazon (AMZN) had put 2 million songs, free of copy-protection, for sale on its new MP3 music store, I -- like nearly everyone else who writes about Apple (AAPL) -- went straight to the site to do a cost-comparison with the iTunes Music Store. My choice: KT Kunstall's Suddenly I See, $1.29 (without copy protection) from Apple, $.89 (also without copy protection) from Amazon, a 40% price differential.

Which raises an immediate question: why are they doing this?

Apple iPhone Unlock: Cat, Mouse, Brick

Coming on the heels of Steve Jobs' "cat-and-mouse" press conference, Apple's (AAPL) warning yesterday that its forthcoming software update could permanently disable unlocked iPhones represents a fork in the road.

On one side you have the users who dutifully signed on for a two-year stint with AT&T. They can update their iPhones with the official software upgrade due to be released later this week and receive the benefits of the latest Apple apps -- which according to several reports will include the ability to download songs and videos wirelessly through the iTunes Music store. They will also be eligible for any updates Apple releases in the future.

On the other you have all those people who either bought an unlocked iPhone from a commercial reseller or installed free iUnlock software from the open source iPhone Dev team. These users can't afford to update their iPhone without risking turning it into the proverbial brick. They are now dependent, perhaps permanently, on whoever modified their device to provide workarounds or restore it to its original, pristine state.

True to Jobs' cat and mouse analogy, the iPhoneDev group has already responded to Apple's announcement, challenging the company's assertions that they have somehow damaged the phones and promising a workaround in short order. Describing the code that tied the iPhone to AT&T as "bugs" and "problems," their statement reads in part:

The removal of those firmware problems, which were built in in favor for AT&T, does not cause "damage" as they want to make us believe.

We will provide you with a tool in the next week which will be able to recover your nck counter and seczones and even enables you to restore your phone to a Factory-like state.

In the meantime we advise you not to update your free iPhone with the upcoming firmware. Wait for the next version to be fixed to work properly with your carrier and not break your phone. (link)

Nobody knows for sure how many iPhone users are affected. Shaw Wu of American Technology Research described the number as "immaterial," representing "only a small group of users, namely hackers." The iPhoneDev group, based on the number of people who downloaded their software, puts it at "several hundred thousand" -- a figure Piper Jaffray's Gene Munster takes as a rough upper bound. "Even if the average hacker downloads the software twice, that's still over 100,000 hacked," he says. "The story is far from over."

For background, see "Steve Jobs Picks a Fight with iPhone Unlockers" 

Apple Stores: How Crowded Are They?

Here are a couple interesting graphs from Gary Allen, who covers Apple's (AAPL) retail business at ifoapplestore.com like a spandex body suit.

The first, published last year in a post entitled "Fighting the Congestion," drew from the company's quarterly reports to draw a picture of rapidly growing traffic in Apple's retail spaces (with a big spike in 2005 representing holiday sales).

At the time, June 2006, this was considered a potential problem. "At Apple’s HQ," Allen wrote, "the talk is all about how crowded the stores have become and how to keep the service level high despite the lingering crowds." Allen conducted an informal survey and found that 60% of the people standing at the display counters were using them to conduct personal business, not checking out the features of the hardware and software. Since then, Apple has cracked down a bit, blocking MySpace visits and restricting Internet access on selected display units. But it has mostly hewed to Steve Jobs' original vision of the stores as public spaces where people are encouraged to play with the toys on display for as long as they like.

Now Allen has taken a second look at the congestion issue and determined that maybe it's not so bad after all. In a graph posted over the weekend, he uses Apple's quarterly reports to make the case that the number of visitors per store fluctuates within a fairly predicable range. He writes:

According to Apple, the number of visitors has increased from 2.1 million in the third quarter of 2002, to 21.9 million in the same quarter of 2007. But at the same time, the average number of open stores has also increased, from 30 in Q3 2002 to 180 in the same quarter of 2007. Based on those figures, the number of per-store visitors has remained fairly stable lately, within a narrow range of from 112,000 to 126,000 visitors per quarter.

This assumes, however, that those customers are evenly distributed among the Apple stores. Based on the comments Allen has received, not everyone is convinced. One reader reports that the Apple outlet in the Burlington Mall near my hometown of Lexington, Mass., is often nearly empty. My experiences at Apple stores in New York and San Francisco are more like this Minnesota reader's:

Try visiting the Rosedale Center (MN) store on the weekends. It’s shoulder to shoulder crowded, and so loud from people talking you’d think you were in a nightclub. To top that off one Saturday I counted 5 one-to-one lessons being held (with no Studio, so they sit along the walls that have demo computers) and the Genius Bar three deep with the next available appointment 4 -hours- out, and every available salesperson occupied, and the line to the cash registers 8 people long. In a store the size of Rosedale that means people were lined up to buy things and the line stretched nearly halfway through the store.

Of course, there are worse fates for a retailer than having too much traffic in their stores. A couple readers reported that a Sony store located just above or below their crowded Apple outlet was almost empty.

Videos: Steve Jobs at the London iPhone Debut

Apple (AAPL) has not provided video of Steve Jobs' performance at the Sept. 18 "Mum is no longer the word" press conference in London, but there were plenty of cameras at the event and some of the footage has started to show up on YouTube. Below the fold:

1. Jobs answers a long, British-style 3-part question with an analogy about going on a few dates before getting married.

2. Jobs characterizes Apple's relationship with iPhone hackers as a game of cat and mouse.

3. Jobs answers the "why no G3?" question by describing the iPhone network as an EDGE and Wi-Fi sandwich.

The Price of an iPhone in Europe: $562 and Rising

In the U.S., the cost of an iPhone has fallen sharply since it was introduced nearly three months ago, from  $599 to $399, thanks to Apple's (AAPL) famous September price cut.

In Europe, the situation is reversed. The devices don't start shipping for more than a month, but iPhones there are already more expensive than they were just a few days ago -- thanks to the falling value of the dollar.

Steve Jobs had priced the phones high to start with, building in the 17.5% value-added tax (VAT), the cost of doing business overseas and a fudge factor to cover currency fluctuations. So far, those fluctuations have worked against the dollar, as the chart below suggests.

Bottom line: an iPhone in Europe today is 40% more expensive than the same phone in the U.S.

Will Steve Jobs Plead the Fifth?

Before Karen Gullo and David Scheer broke the story yesterday for Bloomberg News, Apple (AAPL) managed to keep secret for five weeks the fact that Steve Jobs was subpoenaed by the SEC on Aug. 16 to testify in the government's case against his former general counsel Nancy Heinen.

It's not hard to see why. The news opens once again a chapter that Apple hoped had closed for good last April when the SEC announced that it would not sanction the company for the options backdating episode at the center of the case. At the time, the agency even went out of its way to praise Apple for its "prompt self-reporting" and the thoroughness of its internal investigation. (See here.)

But as Michelle Quinn and Jessica Guynn point out in today's LA Times, "the SEC said it would no longer investigate Apple, but it has not ruled out continued scrutiny of Jobs."

Which raises an interesting dilemma for Apple's CEO when he appears before the SEC.

Steve Jobs Picks a Fight With iPhone Unlockers

Until yesterday, Apple (AAPL) had kept mum about attempts by various third-party programmers to free the iPhone from the binds that tie it to a particular carrier -- AT&T (T) in the U.S. and now O2 in the U.K. and T-Mobile in Germany. As recently as last week Apple responded to questions about the release of iUnlock with a terse "no comment."

But when asked a direct question at the "Mum is no longer the word" press conference in London yesterday, Steve Jobs couldn't remain silent -- especially in front of Matthew Key, CEO of O2 UK, which by all accounts has paid a pretty penny to be the iPhone's sole provider in Britain. Jobs responded to the question "Is unlocking a concern?" as follows:

"It's a constant cat and mouse game -- we have the same thing with the iPod with music." Steve looks at Matthew, "Are we the cat or mouse? We have to stay one step ahead of them." (quote from Engadget's live blog)

The analogy to music is a curious one, given that Jobs has argued forcefully against DRM (digital rights management) schemes that make it hard to copy digital music files -- despite the fact that Apple uses them in iTunes. This may explain his professed confusion about whether Apple is the cat or the mouse in this new game.

Should unlocked iPhones proliferate much beyond the hacker community, Apple would be less at risk than the cellphone carriers. Apple gets paid for its hardware in any event, whereas user fees are the carrier's main source of iPhone revenue.

Apple has not yet deployed its most powerful tool for combating unlock programs: firmware updates for the iPhone so far have disrupted some third-party apps, but haven't touched the unlock solutions. That will almost certainly change, and when it does the cat-and-mouse game Jobs describes will begin in earnest.

Meanwhile, as Gregg Keizer points out today in Computerworld, Apple and O2 have found other means of encouraging British customers to stick with authorized iPhone dealers and carriers. The flat-rate plans (with unlimited data transfers) that O2 announced yesterday are a pretty sweet deal in the Europe smartphone market, where pay-as-you-go is the norm. An even better sweetener may be the free account British iPhone customers will get with The Cloud, which has blanketed London's financial district with Wi-Fi and boasts some 7,500 hot spots in Great Britain and Ireland.

Given that only 30% of the U.K. is covered by O2's EDGE network, iPhone access to those hotspots could turn out to be key.

[Photo courtesy of Shaun Curry/AFP/Getty Images via the New York Times]

T-Mobile Wins German iPhone Contract: Nov. 9 for $553

At a press conference in Berlin today, Steve Jobs announced that Deutsche Telekom AG's T-Mobile division will carry Apple's (AAPL) iPhone in Germany. The device will be go on sale on Nov. 9 for €399 ($553) and will offer access to T-Mobile's 8,600 Wi-Fi hotspots in Germany.

You can read the official press release here.

Apple's iPhone Coming to the U.K. (UPDATE)

UPDATE: Britain's Carphone Warehouse, which had just won the coveted right to sell the iPhone in the U.K., is up sharply in midday trading on news that U.S. electronics retailing giant Best Buy (BBY) has purchased a 3% stake in the company. See here.

Meanwhile, Piper Jaffray analyst Gene Munster estimates that U.K. sales of iPhones will add 78,750 units to his previous projection of 2 million iPhone sold worldwide in the upcoming Christmas quarter. See iPhone in Britain: 3 weeks early, 34% more expensive.

- - - - - - -

With about 100 journalists assembled at Apple's (AAPL) big Regent Street store in London -- and after tea and cakes had been served -- Steve Jobs  announced the terms under which the iPhone will be sold in the U.K., the first country outside the U.S. to get the device.

The 8 GB model running on the EDGE network (not 3G) goes on sale Nov. 9 for £269 ($537), including VAT, and will be carried by O2. "We picked the best one, the most popular carrier," Jobs said, according to Thomas Ricker, who covered the event live for Engadget.

"I've seen hundreds of devices every year, and within a few minutes of playing with the iPhone I knew it as a breakthrough product," said O2 UK CEO Matthew Key. According to a report in The Guardian yesterday, O2 may be paying Apple a kickback of as much as 40% of its iPhone revenue for the privilege of carrying the phone. Jobs declined to discuss the terms of its revenue-sharing plan.

O2, which will be partnering with Carphone Warehouse to sell the iPhone, is offering three 18-month plans -- £35 ($70), £45 ($90) and £55 ($110) a month -- each with nearly unlimited data (although there is a limit of 1,400 Internet pages per day).

In the Q&A, Jobs defended the decision to use the slower EDGE network and Wi-Fi Internet access where available rather than the 3G networks that are widely deployed in the U.K. and Europe. "The 3G chipsets are real power hogs" that cut into battery life, he said, repeating the rational he used in the U.S. But he held out the hope that 3G iPhones could arrive in 2008. "3G needs to get back up to 5+ hours, something we think well see later next year," he said.

Key said O2 has been building out its EDGE network and now covers 30% of the U.K. He added that Wi-Fi access for the iPhone will be provided at some 7,500 hotspots by The Cloud, which bills itself as Europe's leading wireless broadband network.

Based on earlier reports, it is expected that Orange will be providing iPhone service in France and T-Mobile in Germany, Austria, the Netherlands, Hungary and Croatia. (See Apple's iPhone Heads for Europe and European iPhone Update.)

[Thanks to Engadget's Thomas Ricker for the on-scene reporting.]

[Photo courtesy of netdog via MacRumors]

iPhone in Britain: 3 Weeks Early, 34% More Expensive

The iPhone is coming to the U.K. earlier than expected and at a higher price point, which analysts say could give Apple's (AAPL) bottom line a nice bump. (For details on Steve Jobs' London press conference, see Apple's iPhone Coming to U.K. Nov. 9 for $537.)

"The UK launch ... is essentially three weeks ahead of our expectations," writes Piper Jaffray's Gene Munster, who as a result has raised his iPhone unit sales assumptions for the December quarter by 4%.

Munster estimates that O2, the carrier Apple has chosen to partner with in the U.K., has about 18 million subscribers, compared with AT&T's approximately 64 million. Given his previous estimate that Apple is selling 13,500 iPhones a day in the U.S., Munster projects daily sales of 3,750 iPhones in the U.K., or an additional 78,750 iPhones for the quarter. That's over and above the 2 million iPhone sales for the quarter that he had projected before today's announcement.

Munster was also surprised by the £269 ($537) price point. "It's more expensive" than he anticipated, he told Apple 2.0. "Typically Apple products [in the U.K.] are 25-30% over the U.S. price, and the iPhone is 34% [more].

For Apple's official London press announcement, click here.

Apple's iPhone Coming to the U.K. Nov. 9 for $537

With about 100 journalists assembled at Apple's (AAPL) big Regent Street store in London -- and after tea and cakes had been served -- Steve Jobs  announced the terms under which the iPhone will be sold in the U.K., the first country outside the U.S. to get the device.

The 8 GB model running on the EDGE network (not 3G) goes on sale Nov. 9 for £269 ($537), including VAT, and will be carried by O2. "We picked the best one, the most popular carrier," Jobs said, according to Thomas Ricker, who covered the event live for Engadget.

"I've seen hundreds of devices every year, and within a few minutes of playing with the iPhone I knew it as a breakthrough product," said O2 UK CEO Matthew Key. According to a report in The Guardian yesterday, O2 may be paying Apple a kickback of as much as 40% of its iPhone revenue for the privilege of carrying the phone. Jobs declined to discuss the terms of its revenue-sharing plan.

O2, which will be partnering with Carphone Warehouse to sell the iPhone, is offering three 18-month plans -- £35 ($70), £45 ($90) and £55 ($110) a month -- each with nearly unlimited data (although there is a limit of 1,400 Internet pages per day).

In the Q&A, Jobs defended the decision to use the slower EDGE network and Wi-Fi Internet access where available rather than the 3G networks that are widely deployed in the U.K. and Europe. "The 3G chipsets are real power hogs" that cut into battery life, he said, repeating the rational he used in the U.S. But he held out the hope that 3G iPhones could arrive in 2008. "3G needs to get back up to 5+ hours, something we think well see later next year," he said.

Key said O2 has been building out its EDGE network and now covers 30% of the U.K. He added that Wi-Fi access for the iPhone will be provided at some 7,500 hotspots by The Cloud, which bills itself as Europe's leading wireless broadband network.

Based on earlier reports, it is expected that Orange will be providing iPhone service in France and T-Mobile in Germany, Austria, the Netherlands, Hungary and Croatia. (See Apple's iPhone Heads for Europe and European iPhone Update.)

[Thanks to Engadget's Thomas Ricker for the on-scene reporting.]

[Photo courtesy of netdog via MacRumors]

European iPhone Update: 02's "Mad" Terms, T-Mobile's Expanded Empire

With an Apple (AAPL) press conference set for 10 a.m. London-time tomorrow (see Apple's iPhone Heads for Europe), new details are emerging about the  company's plans for rolling out the iPhone across the pond.

The most intriguing revelations come from Richard Wray in The Guardian, who tells the story in this morning's paper about how Steve Jobs played the four major European network operators against each other -- signing contracts for the U.K. market with three of them and even dispatching Apple technicians to help configure their networks to work with the iPhone -- only to extract terms from O2 at the last minute that one source describes as "madly money-losing." Money-losing for O2, that is, not for Apple. According to Wray, O2 is sharing its retail sales business with the Carphone chain and kicking as much as 40% of its iPhone revenue back to Cupertino, an arrangement he says is raising eyebrows in The City (London's version of Wall Street).

Meanwhile, Financial Times Deutschland, sister paper of London's FT, reports that T-Mobile is holding a press conference on Wednesday to announce that it has secured the rights to sell the iPhone not just in Germany, but in Austria, the Netherlands, Hungary and Croatia as well. The terms of this deal are said to be less onerous and more in line with the 10% revenue sharing model mentioned in earlier reports.

Finally, TechCrunch France reports that Apple and Orange will wait until next Tuesday -- the day before the opening of the big Apple Expo in Paris -- to announce the terms of their deal (contradicting The Observer, which had the Orange press conference set for Thursday). According to TechCrunch France, which ran a blurry photo of a French-language iPhone screen, the device will be available in France on Nov. 29 and sell for 300 euros ($416) without 3G service or an unlimited data plan. (See here for the English-language version.)