With the iPhone, Steven Jobs casts a spell on the American consumer

SAN FRANCISCO: During an onscreen demonstration of the iPhone in Apple's sprawling retail store here recently, an employee clad in a black T-shirt surprised a potential customer.

Nonplused and confused, the customer stammered, "You mean it's a cellphone, too?"

Such is the spell that Steven Jobs has cast on the American consumer.

It has been almost six months since Jobs, the world's consummate salesman, introduced the iPhone as the Ronco Veg-O-Matic for the Internet era. Tongue only partly in cheek, Jobs promised that Apple's entry into the handset market would be a better phone, Web browser and music player.

Although the phones are expected to cost as much as $600 and they will not be available in the United States at Apple and AT&T stores until later this month, both companies have received more than a million inquiries about the product's availability. Introduction in Europe is planned later this year, followed by Asia next year.

Evidence that expectations have been wound up to a fever pitch: The phones, or promises to deliver a phone, are already on sale for the unwary on eBay for $830.

The anticipation, which is intense even by Jobsian standards, has led to some quiet, behind-the-scenes anxiety at Apple. Some Apple executives worry privately that expectations for the one-button phones may be too high and that first-generation buyers will end up disappointed.

Certainly there are skeptics. The high price will limit the phones' appeal to true believers. The cellular network that the iPhone operates on is slower than those of many of its rivals. Several of Apple's handset competitors hope that its decision not to include a keyboard, relying instead on a touch-screen virtual keyboard, will limit the attractiveness of the iPhone in text-intensive business markets.

"It's very media-centric," said a director at a handset competitor who declined to be identified because of his company's desire not to elicit comparisons with the iPhone. "It will hit one sweet spot, but not necessarily all of the sweet spots - we hope."

As has often been the case during the last three decades, Jobs's timing may be impeccable. While entire industries have been struggling for more than half a decade to find the right combination of features to merge mobile phones and computers, Apple appears to have stepped in at just the right moment.

"These devices have become ubiquitous and there's an enormous hunger out there," said Peter Schwartz, the chairman of Global Business Network, a consulting firm based here.

Most analysts believe that Apple will easily exceed its initial goal of selling 10 million phones by the end of next year.

"It will be just 1 percent of the handset market," said Jagdish Rebello, a research director at iSuppli, a market research firm in El Segundo, California. "But it is essentially shifting the balance of power into the hands of the mobile device manufacturers."

Apple said several months ago that it would have the ability to add features to the iPhones after they were purchased. The company's executives say that the capability to upgrade the iPhone in the field will give it a significant advantage over other cellphones, which are usually replaced frequently.

One potentially crucial factor in determining the iPhone's success or failure that has yet to be clarified by the company: How willing is Apple to permit independent software vendors to develop programs for the iPhone? When he introduced the phone in January, Jobs said that opening that door could raise both security and stability issues that were unacceptable in the wireless handset market.

Last week, however, at the D: All Things Digital conference, he seemed to relent. He said Apple was looking for ways to make it possible for developers to create software for the iPhone.

Software, Jobs said last week, is what makes the difference. Poor software, he said, is what undermined the Japanese consumer electronics industry. Software, he said, is what will give the iPhone a five-year lead on the rest of the handset industry.

"If you look at the iPhone, it's software wrapped in wonderful hardware," he said.

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