To a visiting American, the Apple store in Shibuya is a source of pride, a sign of American design prowess in a sector, consumer electronics, traditionally dominated by Japan. Walk in even late in the evening, and the gleaming showroom is filled with customers. By U.S. standards, Japan is a gadget-crazed country. The thousands of otaku roaming the streets of Akihabara have no U.S. equivalent-even in the Silicon Valley. That makes Apple’s success here in this retail shop, one of seven in Japan and more than 180 worldwide, all the more remarkable. So I pulled out my digital camera to take a few souvenir snapshots. And that’s when a store manager informed me, politely but firmly, that no pictures are allowed.

It was a classic Apple moment, one that mirrors the company’s approach to product development and marketing: an obsessive attention to detail combined with an obsessive need to control. To be fair, the pleasure of the former sometimes requires a big dose of the latter. If you prefer a cathedral to a bazaar, a closed environment to a free-for-all, few product environments are more thought out or more insular, than Apple’s.

Apple under Steve Jobs has excelled at industrial design, and the iPod combines a sleek look with an interface so intuitive you scarcely need to refer to the manual. This same balance of look and feel can be seen in the iPhone, Apple’s foray into the mobile phone sector. As with the iPod, Apple is a latecomer, even more so here, but plans to conquer by a combination of clever design and the “⁠cool factor⁠”⁠ that has made the company’s brand something of a religion.

At this writing, iPhones are due to ship in the U.S. in less than a month-the end of June. There are as yet no reviews, because no reviewers have gotten their hands on the phone. An iPhone was spotted coming out of the pocket of Steve Jobs, and is reportedly in the possession of a select group Apple executives who claim, like Charlton Heston did about his rifle, that the device will have to be pried from their cold, dead hands.

Despite, or because of this secrecy, Apple and AT&T (formerly Cingular), the carrier that struck the deal with Apple making it the exclusive U.S. provider, have each received more than a million inquiries each. So much buzz has swirled around the iPhone that some Apple executives have quietly expressed concerns that no matter how good the actual product, the iPhone will disappoint some customers. But what will not disappoint is the power of the brand. For the time being, the few proud and persistent who get their hands on the iPhone will have, at the very least, a status symbol reminiscent of the earliest days of mobile phones, when getting interrupted by a call was a social statement.

Beyond that, the iPhone will compete in a market that is far more crowded than the one Apple encountered with the iPod. Some analysts predict that Apple will sell some 10 million iPhones by the end of 2008. While that number constitutes just one percent of the global cellphone industry, it would still be an impressive entry.

Ironically, the iPod also puts Apple in completion against its traditional nemesis, Microsoft, whose Windows Mobile software is gaining traction as a platform-of-choice for smartphones. Comparisons to the computer sector are tempting. Microsoft has not gone into the cellphone business, preferring to license Windows Mobile to Palm for its Treo and to Motorola for Motorola Q. By contrast, Apple controls both the hardware and the operating system, just as it does on the Mac. The former is the strategy for propagating a software platform, while the latter, for better and worse, is pure Apple.

No keyboard, big touchscreen

If the iPod’s signature feature is the Click Wheel, the iPhone’s is the 3.5-inch “⁠widescreen⁠”⁠ touch screen. To accommodate a screen that large without making a phone the size of a brick, Apple had to give up something, and the iPhone has neither a full-featured “⁠QWERTY⁠”⁠ keyboard as is found on the Blackberry and other devices, or a conventional telephone keypad. Rather, the keyboard is presented onscreen. Apple claims that this approach is easier to use and more efficient. While plenty of Blackberry users will remain unconvinced, Apple has made a bold engineering tradeoff.

The iPhone’s screen gives it an advantage for mobile entertainment-and yet it represents a gamble here in America, where high definition televisions the size of small billboards are dominating the living room. Mobile entertainment is still in the proving stages, but if you want to watch one minute episodes of 24: Conspiracy (billed as a companion program to the Fox series 24 created especially for mobile phones), a 3.5 inch screen is better than one half that size. The iPhone’s large screen has other uses, as well-showing everything from address book selections to video to album covers. The VisualVoiceMail feature provides e-mail-like listing of voice mails so that you can pick and choose. The iPhone’s camera is 2 megapixels-which matches but doesn’t surpass the current state of the art. Here in the U.S., the iPhone will first run on AT&T’s GMS network, and as a quad band, it will have good roaming power overseas.

The iPhone has a sense of place. Rotate the device 90 degrees, and a built-in accelerometer detects the motion so that the onscreen image re-orients itself accordingly. Lift it to your ear, and the display automatically turns off to save power. Turn down the lights, and the display brightens accordingly. The iPhone also includes a couple of ways to link to the Internet: via AT&T’s Edge network, which is slow compared to 3G, as well as by 802.11b/g Wi-Fi. A portable version of the Safari browser is included, as is Bluetooth. This multi-signal connectivity, combined with the iPhone’s software suite, makes this a pretty respectable convergent device: combining and cell phone, MP3 player, portable video player, PDA-style personal organizer, email/SMS communicator and portable Web browser.

Apple’s clout

Apple has always charged a premium for its products and the iPhone is already a much-cited example: in the U.S., the cost is $499 for 4GB, $599 for 8GB, reportedly with an obligatory two-year contract from AT&T/Cingular. Prices for Europe, where the iPhone will debut later this year, and in Asia, where it will ship in 2008, have not been announced.

That Apple can charge these prices says something about the company’s clout. In the tug-of-war between the mobile carriers and the device manufacturers, the carriers have dominated. For example, my Sony Ericsson W300i Walkman phone is co-branded with “⁠Cingular,⁠”⁠ and the carrier’s former name also appears along with its “⁠Raising the bar⁠”⁠ tagline in the opening and closing screen animations. If I want to download music, the onscreen menu item says “⁠Cingular music.⁠”⁠ If I want more ringtones, the logical place to look is Cingular’s website-not Sony Ericsson’s. Indeed the entire contents contained within the menu hierarchy, especially when it comes to buying more, is determined by the carrier, not the device manufacturer. The iPhone is a notable exception to this industry practice. The menu and contents are controlled by Apple, and the corresponding website is iTunes, not AT&T. Steve Jobs is the smiling face behind the iPhone. As for Randall Stephenson, the chairman and CEO of AT&T-well, he only took over in June.

Another industry tug-of-war was also in evidence at Job’s presentation, where Yahoo and Google both shared the stage. Yahoo’s contribution includes a Blackberry-like IMAP email “⁠push“⁠ service (on most phones, you query an email server, whereas here, arriving email alerts you) while Google Maps is integrated with the phone’s mapping application. Both companies will offer Internet search, which is fast becoming the gateway application on mobile devices, much as it has been on computers. As such, the search companies have the potential to stand between the mobile companies and their customers. Until now, that relationship has been almost entirely exclusive in terms of services. The phone company builds the network, provides the voice service, populates the phone with applications and features, and gets additional revenues. But if callers learn to point their browser at Google, Yahoo, or Microsoft, the mobile carriers will have lost control.

“The tension between the two sides is reflected in the scarcity of major alliances between carriers and big-name search companies,⁠”⁠ wrote New York Times reporter Miguel Helft. “⁠Among the big American cellphone operators, only Sprint has a wide-ranging partnership with a top search provider, Microsoft. Most other large carriers are working with small technology companies that offer generic search services, which the carriers can stamp with their own brand.⁠”⁠

Killer competition?

With the IPhone’s introduction, a few competitors were suddenly dubbed “⁠iPhone killers.⁠”⁠ While such claims are pure speculation, they do serve as a reminder that Apple hardly has a monopoly on innovation, nor is it the only company that can manufacture a mobile phone with a touchscreen. Take the LG KG850, for example. In a side-by-side photo comparison, the website Engadget notes the comparable size of the touch screen and the softkey keyboard. The phone has garnered an International Forum Design award, and at this writing, the phone is rumored to be Verizon’s answer to AT&T.

But on the website Gismondo, Brian Lam preferred the iPhone. He wrote that the phone is the nicest the company has produced, but, for the high price, is encumbered with a conventional user interface. By contrast, “⁠the iPhone uses it's touchscreen to zoom photos and webpages, and click-scroll through long lists. iPhone has all the iTunes and data syncing integration built in, and the neato factor of Coverflow [a 3D GUI for searching through music libraries. The technology was acquired by Apple.]. iPhone has networked widget compatibility for weather, stocks (yawn), and who knows what else is coming down the line.⁠”⁠ The LG’s screen is slightly smaller, “⁠the browser sucks,⁠”⁠ but it can run J2ME programs.

The Motorola model that best compares with the iPhone is the Z8, which features a 2.2 inch screen and up to 4GB of memory via an SD card, support for High-Speed Downlink Packet Access (HSPDA), and the usual Bluetooth capability.

Further out on the design limb is the oval-shaped Ocean from the telecommunications company Helio-a joint venture of EarthLink and Korea’s SK Telecom-which contains both a numeric and separate alphanumeric keypad, along with a fat portfolio of features. In what the company calls the “⁠ultimate inbox,⁠”⁠ the phone offers “⁠out-of-the-box access⁠”⁠ to email from Yahoo, AOL, MSN Hotmail, Gmail, Helio Mail and EarthLink, with push mail from Yahoo, AOL and MSN. Users can add two additional IMAP or POP3 email accounts. The company has plans to support Microsoft Exchange ActiveSync, for wireless synchronizes to Outlook apps. There are the expected IM and SMS messages, also through a variety of providers, and a GPS-enabled version of Google Maps.

This heterogeneous concoction runs on a 3G network, which is unusual for the U.S., where slower connections are the norm. The company has even tentatively emulated Apple and Sony by opening its first retail shops, beginning in the trendy Santa Monica.

Third-party application development: not here

Nowhere is Apple’s control (“⁠no pictures, please⁠”) exerted more clearly on the iPhone than in the area of third-party application development. When the iPhone was first introduced, outside developers were excluded from the party. “⁠We define everything that is on the phone,⁠”⁠ Jobs told the New York Times. “⁠You don’t want your phone to be like a PC. The last thing you want is to have loaded three apps on your phone and then you go to make a call and it doesn’t work anymore. These are more like iPods than they are like computers.⁠”⁠ Later, at the annual stockholders meeting in May, Jobs softened his position, saying the company was wrestling with the issue of how to give third-party developers access without sacrificing the quality of the suite or the security of the phone.

Then at a question-and-answer session at the All Things Digital Conference (where Jobs made a rare joint appearance with Bill Gates), Jobs said that the company was working on “⁠a way to let third parties write apps and still preserve security.”

The security argument is hard to swallow. While some smartphones have been the targets of viruses, the threat is more theoretical than real. Nor does this seem to be a big concern for the makers of the major mobile phone development platforms-Java, Symbian, and Windows--nor does it appear to worry Research in Motion, maker of the Blackberry. Everywhere you look in the mobile phone business, third-party development is not just permitted, but actively encouraged. At Nokia, for example, developers can find blogs, tools and SDKs. There’s support for Java, the Symbian OS, Web services, mobile Web design, Flash Lite, and more. At Motorola, the MOTODEV site focuses on Linux and open source development with everything from graphics tools to USB drivers.

InfoWorld columnist Tom Yeager made this point on his blog, writing that “⁠BlackBerry is pure Java, with free tools straight from the vendor⁠”⁠ and that “⁠Windows Mobile is obviously developer-friendly.⁠”⁠ While Visual Studio is not exactly free, developers can enroll in the Microsoft Developer Network, which “⁠will net you all the goods you need to develop end-to-end mobile solutions in BASIC, for pity's sake.⁠”⁠ He pointed out that Windows Mobile 6 will debut on the Treo and Blackjack around the same time that the iPhone ships. “⁠It'd be a pity if iPhone came up short next to a candy bar handset that costs $99 with a 1 year contract, he wrote, referring to Nokia’s low-end models.”

And that’s the balancing act Apple faces. Does it open iPhone to outside apps, losing some control but gaining variety, or does Apple keep the environment “⁠pure.⁠”⁠ Apple’s dilemma resembles that of Disneyland, where people pay good money to live in a well-scrubbed, highly controlled environment-precisely because it is so predictable and cohesive. People go on cruises and flock to Ropongi Hills for similar reasons.

I’ve always been amazed that the Apple brand has been associated so closely with that company depicted in the now-famous “⁠1984⁠”⁠ Apple commercial-which is all about rebellion. Outside-the-box thinking? Certainly. But if you really want to show your independence, to be a rebel, you should be running Linux. The Apple brand stands at the far end of free-for-all open source; it is a cathedral-beautiful, but highly controlled. I’m reminded of the film “⁠The Truman Show,⁠”⁠ in which a man is born in a fully controlled, artificial environment made to look like the perfect American town. The film suggests that no matter how pleasant the surroundings, people will eventually want to break out of their enclosure into the wider world. But millions of iPod users, married to iTunes and Apple’s FairPlay digital rights management (DRM) technology, say otherwise. Sometimes, the walled-off world, the gated community, is just where you want to be.