5 things you should know about iPhone 4

A day after Apple CEO Steve Jobs announced the iPhone 4, it's time for a reality check. Lots of people have questions, and we have answers -- even to stuff some readers might not have asked for. The list is more strategic than speeds-and-feeds informational. But first, quick links to yesterday's Betanews stories:

• Is AT&T breaking the law by changing iPhone upgrade eligibility?
• New iPhone 4 is slimmer, faster, super high-resolution, and lasts longer
• This blog post could save you from Steve Jobs' iPhone 4 Reality Distortion Field

Additionally, over at my Oddly Together blog, I consolidated my tweets (and others' responses) during Job's keynote. My tweets -- quick reactions in real time -- are foundation for this post. I hadn't thought of Twitter as a notepad before, but I suddenly see the utility. Others might try using Twitter this way: Punch out quick inspirations as they come and collect them later for other use.

With that introduction, here are 5 things you should know about iPhone 4, presented in no particular order of importance:

1. Jobs' health is back. Apple CEO's Worldwide Developer Conference keynote was tour-de-force marketing -- Jobs like we haven't seen him for two years. Jobs didn't just command the stage, he stayed on it. In the public engagements before his leave of absence, Jobs typically spent limited time on stage, handing off major presentation duties to others. Yes, he shared the stage yesterday, but in fashion as seen before summer 2008 -- when he was healthier.

Jobs' renewed vigor is important to Apple investors and partners, and it's a blow to competitors. The icon is back, and he's badass. In December I asked: "Will 2010 be another year of Apple iteration, not innovation?" So far, I'd say the innovation is back, in part because Jobs is back. Apple innovation is as much about marketing as technology. Looking at iPad and iPhone 4 marketing, it's back to the caliber before Jobs' health declined more than two years ago.

2. Jobs showed developers the money in iOS (formerly iPhone OS). Speaking of marketing, Jobs made the right pitch to developers yesterday: Money. All development platforms share several attributes in common:

1. There are good development tools and APIs for easily making good applications.

2. There is at least one killer application people really want.

3. There is breadth of useful applications.

4. Third parties make lots of money.

5. There is a robust ecosystem.

The fourth of these characteristics is the most important. No matter how good the platform, third parties will only support it if they can make money. Yesterday, Jobs spent nearly as much time showing developers the money -- whether directly made from selling apps or the potential from iAd advertising -- as introducing iPhone 4. Some highlights:

• Slide quoting eBay CEO stating the company's iPhone app did $600 million in volume last year and an expected $1.5 billion this year.
• Jobs telling WWDC attendees that Apple paid iOS app developers $1 billion as part of their 70 percent revenue share.
• Slide with developer quote: "I earned more on sales of The Elements for iPad in the first day than from the past five years of Google ads on periodictable.com."

Jobs showed developers the money, or where they can make it. But marketing is the key here -- how and what Jobs presents. Google and Microsoft have profitable platforms, too. It's time they started being this explicit about how much developers can make and where.

3. FaceTime won't be big time -- at least not anytime soon. Jobs' Reality Distortion Field has lots of people pining about iPhone 4's new video-calling feature -- FaceTime. Say, folks, you need some face time with reality, and not the one spun by Jobs. At Business Insider, Dan Frommer asserts: "Why the iPhone's 'FaceTime' video calling will succeed where others have failed." At Businessweek a Connie Guglielmo story headline leads with "IPhone gets jump on rivals with video." An earlier version of the story attributed the video jump to analysts.

Frommer writes:

Why will Apple's "FaceTime" do better? First and foremost, because it will finally be available on a device that will achieve sufficient saturation among groups. Video calling is a social function and therefore there is a network effect in play. If not enough people have the capacity to make video calls, then even the people with phones that support video calls are out of luck.

But think about all the peer groups -- like mine -- with iPhone penetration above 75%. That sort of saturation generally doesn't exist for other phones. As those groups upgrade to the new iPhone 4, video calling will be a reality for them. (And the requirement that both parties have iPhone 4s and not old iPhones or Macs or iPads could help Apple convert a few more customers.)

Frommer goes on to cite the clarity of WiFi calling and ease of setup as other reasons why FaceTime will succeed. Get a grip, dude. You need some antidote to that Apple Kool-Aid. The important "network effect in play" is AT&T (See #4 more on that). Apple has said that FaceTime will be WiFi-only for 2010. There may be lots of groups that could make video calls but they largely won't because they can't do so anytime, anywhere. They need WiFi, and it's not available everywhere.

It's the major reason why video hasn't taken off in the United States -- there's no carrier support. That FaceTime requires iPhone 4 is another huge limitation. The iPhone install base will be largely front-cameraless for some time. By the way -- do see #4 for more on this one -- AT&T has nixed unlimited data plans for new activations. So if in the future, the carrier does offer 3G video calling, the 200MB or 2GB limits will make it impractical for most people living in the United States -- unless iPhone pops up on another carrier first.

4. AT&T will hurt iPhone 4 in the United States. Last night, at Businessweek, Rich Jaroslovsky asked: "IPhone 4 makes video call, how about voice?" Jaroslovsky writes:

The device has always been miserable at a telephone's most basic function, especially in such critical markets as New York and San Francisco. It's never been entirely clear how much of the blame belongs to AT&T Inc.'s overstretched network, and how much to the fact that the iPhone was engineered by a computer company with no previous cell-phone experience. The Apple representatives who demonstrated the phone for journalists yesterday were primed to say as little as possible on the subject.

The new design may help increase signal strength a bit, they said, but they made no claims for improvement in the ability to complete or maintain a voice connection. Improving the iPhone's performance as a phone may be the most important step Apple could take to sell more of them, short of making it available on the more robust Verizon Wireless network.

Jaroslovsky's post resonates with an IM conversation Betanews founder Nate Mook and I had yesterday about iPhone 4. We both are using Google's Nexus One. Question of the evening: Would you switch to iPhone 4? My answer was an emphatic "No!" But my reasons have little to do with the device. They're all about the network:

• There are too many dropped calls or failed connections.
• On June 1, AT&T raised smartphone early termination fees by 86 percent.
• Yesterday, AT&T replaced unlimited data plans with metered 200MB and 2GB options.
• At T-Mobile, there are few dropped calls and I pay less for unlimited data, text and telephony on four lines than I did for AT&T's 2,100-minute family plan.

A phone should be a phone first and a smartphone should be a data device second. AT&T fumbles both criteria. The metered data plans will soon be as important a foible as calling. Most people I talk to don't seem to understand how those new data fees may limit their data usage. Clicker's June 4 video test post is a must read for every iPhone or iPad user on AT&T's metered plans.

Clicker concludes:

1. If you don't have the unlimited plan, get it before June 7. Run don't walk! (And yes, from experience, the 3G iPad is completely the right call. It's awesomely convenient.)

2. If you don't get the unlimited plan, and plan to stream via apps on your iPad, go WiFi as much as possible. Otherwise it's going to cost you.

Well, June 7 has passed, so you've been warned. Clicker tested on an iPad. I predict that with background applications running on iOS 4, many people will be surprised just how much data they will consume. Again, you've been warned.

5. Apple's approach to rights usage assures the iBookstore will succeed. Yesterday, Jobs announced that iBooks would be available for iPhone and iPod touch later this month. He also made clear that the electronic books would be available and syncable across all three devices (including iPad). There is DRM, but like the early iTunes Store, Apple is making rights limitations largely invisible to users. Most people won't ever know DRM is there, so it won't matter to them.

Last week, I noticed that Amazon replaced its big Kindle device promotion on the home page with "Kindle for iPad." That says something about how Amazon views iPad and iBookstore momentum as a rival e-book platform. That platform can only grow as iOS 4 opens up new devices to Apple's iBooks. The difference: Apple supports its own products, while Kindle is available for many devices. Will the many or the one -- or none -- own your library?