Minority Report: Buy the iPhone philosophy...

Or suffer the consequences...

The UK is about to get its hands on the iPhone. Seb Janacek looks to the US for clues about the device's likely impact.

The iPhone party has arrived in Europe. Apple CEO Steve Jobs made a flying visit to London last month to announce the launch of the much-hyped device. He turned up at the Regent Street Apple Store with O2 UK CEO Matthew Key in tow. The operator has won the exclusive contract to sell the iPhone.

The iPhone will cost £269 and be available on 18-month contracts starting at £35 per month. In all other respects the device is the same as the US version, minus the lower capacity 4GB alternative and no 3G, despite speculation that that phone would take advantage of the better HSDPA network that exists in the UK.

Jobs said the 3G chipset was still too power-hungry for the iPhone but estimated a HSDPA version would hit the shelves sometime in 2008.

According to reports, Apple played off the UK's four main networks against each other. The bidding war left each one believing they had clinched the exclusive deal for the iPhone at one point or another. At the London event, Jobs insisted the company chose O2 because it "felt most like home".

The Apple boss may have been alluding to shared brand values but it is rather more likely he meant that the O2 deal allowed it to retain the high profit margins it enjoys on products.

Key to negotiations would have been how much O2 was willing to accede to the massive demands and trade-offs that Apple demanded during its negotiations with operators.

Financial details about the deal have not been disclosed but some reports suggest the Cupertino company is raking in as much as 40 per cent of O2's contract revenues from the iPhone.

That would be a staggering sum and indicative of how much the mobile operator sees the device as a honey pot for new customers.

Normally the cost of the device is repaid to the operator via the monthly contract rate it charges customers. In this case Apple sells the device for £269, puts that in the bank then appears to take a cut of the contract revenue too.

It's pretty clear that Apple sees the operators as a necessary stepping stone as it enters uncharted waters and there's no sign of the usual mobile content nonsense on the iPhone.

Apple has shown no interest in featuring any mobile content from either O2 or AT&T. Instead it has announced a direct link to the iTunes Store for downloading new music over a wi-fi connection. All it's after is the network.

Despite its heavy investment in a 3G licence and network, O2 has had to build up its Edge network on which the iPhone currently operates. O2's Key said the operator has been developing its Edge network and now covers 30 per cent of the UK.

The company will also dedicate 1,000 call centre staff to supporting early iPhone adopters. It all adds up to a tidy sum before a single device has been sold.

In return, O2 will hope to get two things: lots of new customers and a ride on Apple's marketing magic carpet.

New customers are the be-all and end-all of the mobile business and evidence of the iPhone's US success is plain to see: AT&T signed up more than a million new customers to its network in just 74 days thanks to the iPhone. O2 will hope for a comparable level of demand from UK consumers.

The iPhone was stealing headlines for months before it was even released. The buzz around the device is infectious and O2 can share at least part of the limelight with Apple when the marketing blitz rains down ahead of the early November launch and the expected avalanche of new customers. Or Apple fanboys, depending on who you believe. Either way, it all amounts to the same thing - unit sales and lots of them.

Three recent developments might have an interesting impact on how well the iPhone does in Europe.

The first is the well-publicised drop in unit price, down $200 in just two months, which might make European early adopters wary. It certainly caused uproar in the States, so much so that Apple - clearly having anticipated the fallout - offered a $100 rebate to disgruntled iPhone owners.

The second is the release, ahead of the European iPhone launch, of the iPod Touch. The device was the highlight of a revamp of the entire iPod line. The new flagship iPod features the same form factor and touch-sensitive interface as the iPhone.

A first glance at the iPhone Touch suggests it might cannibalise sales of the iPhone. For all intents and purposes it looks like an iPhone. It also shares many of the same features, including photos, videos and wi-fi.

As with its Macs, Apple has carefully and deliberately compartmentalised the iPod-iPhone product range. Having played with an iPod Touch - though not an iPhone - it's clear that while the big selling point interface is identical the stated purpose of the device is not.

The iPod Touch features everything except the personal connectivity and phone features. The lack of connectivity with PDA-type functions is noticeable. For example, you can't add calendar items despite the virtual keyboard.

There is also no email application, despite the wi-fi. Apple has done a pretty good job of drawing the line between the two devices, a careful balancing act.

The third development is the recent news that US iPhones that had been hacked to install third-party apps to run on networks other than AT&T have been effectively turned into expensive bricks by a software update.

According to reports, some devices that had been altered to run third-party applications - something Jobs said the device would not support - had those programs wiped out following a routine upgrade.

Those who hacked the device to run on other mobile networks reported that their phones were "bricked". Reports state that Apple has expressed little sympathy for those with "bricked" phones, suggesting they purchase a new one.

Apple has issued similar warnings about hacking the iPod Touch and it would take a brave person to install a third-party email app, for example, without giving any thought to the effect of resultant software upgrades.

The iPhone and the Touch are devices bought purely on Apple's terms and the company is selling its vision for personal communications with zero tolerance. While it might win plaudits for its interface design and vision, it will certainly lose fans for the zeal with which it enforces its aesthetic.