From the day it launched two years ago, Apple's iPhone has been a tornado of disruption ripping through the wireless phone market. With the release of the iPhone 3G S and, at least as important, a new version of the basic software for all iPhones, the upheaval will intensify and spread to new markets.
The latest moves seem designed to wreak havoc on the competition. The iPhone 3G S hardware is a relatively modest update of the current phone, but the changes address the few areas where Apple (AAPL) lagged rivals. For example, the mediocre camera has been replaced with a 3-megapixel autofocus unit capable of quality video recording. A faster processor boosts performance, and storage is doubled, to 16 or 32 gigabytes. For this, you pay either $199 or $299 with a two-year AT&T (T) contract. Battery life is significantly improved when you are on a Wi-Fi network, but not when you are on 3G. And you can not only voice-dial but also use speech to control many iPhone functions. At the same time, the existing 8GB iPhone'3G remains in the lineup at a market-threatening $99.
Competitors have at least as much to fear from the new software, which is free for the original iPhone and iPhone 3G and a $10 upgrade for the iPod Touch (a Wi-Fi equipped iPod you can think of as a phoneless iPhone). Apple moved to match and, in many cases, leapfrog the competition. You can now cut and paste text in any application. The on-screen keyboard works well in both vertical and horizontal orientations. A technology called push notification can be used to wake a sleeping app, such as an instant-messaging program. And app publishers can sell add-ons such as extra game levels, or content such as e-books, from within their programs and bill the purchases through the App Store.
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