Apple’s iPhone promises to be very spectacular indeed: it can free users from the mobile operators’ heavily guarded walled garden business models. It is a true smart phone, with features such as web browsing, camera, VoIP, music, etc. Add to this the ability for software developers to come up with a range of other applications for the iPhone and it becomes clear that, in theory at least, this disruptive product has great potential.

But to the practicalities …..

What can you do with a phone like this without a network? There has been a certain amount of lip service paid by some operators, indicating that they welcome the iPhone, but that really is only lip service, as they are not going to provide an interesting pricing package that would allow iPhone users to maximise the features of the device.

You would typically see iPhones being ‘allowed’ to be added to a high-entry-level voice package – for example, a $50 voice package and a $25 data package on top of that for the kind of services the iPhone would be ideally suited for. But how many customers are going to spend at least $75 a month in order to be able to use the excellent features of the iPhone? For services like this a flat rate package of, say, $30 a month is needed.

True, some of the iPhone’s applications can be used offline (pics and music), while at home or in a café it can also be used on a WiFi network and you can even make VoIP calls that way, but users don’t like to be restricted to such limited network options.

There is no immediate likelihood of any sort of ubiquitous wireless broadband network such as WiMAX, which would be ideal for products like the iPhone (we estimate this won’t happen until 2010-2012); therefore there is currently no real alternative to bypass the dinosaurs in the mobile industry. And, anyway, the mobile operators generate 95% of their revenues from very highly-priced mobile calls and SMS/texting. They don’t want to undermine this with VoIP and email. The Japanese and Korean markets are evidence of the fact that proprietary SMS will be replaced by ubiquitous email.

There will be some mobile operators in the most competitive markets who may come up with a more data-focussed business model that would suit the iPhone (eg, this has already happened in Sweden) but I can’t see a large number of such innovative operators emerging in the near future.

Certainly, the iPhone is throwing the cat amongst the pigeons, but the pigeons are not too worried at this point.