Apple's new iPhone will be in stores on Friday, but most cell phone customers won't be able to use it because of an exclusive deal with AT&T. Roughly 140 million users will be shut out unless they switch carriers, something that could be costly.
ANTHONY BROOKS, host: And now, shocking, shocking news that I'm sure you haven't heard anywhere else. Apple's iPhone goes on sale this Friday. The potential for Apple is huge. The cellphone market is worth about a billion phones a year. The hype is huge too. But as NPR's Wendy Kaufman reports, buying and enjoying the iPhone will not be easy.</s>WENDY KAUFMAN: For the uninitiated and those who've missed the TV ads, the iPhone is a stunningly slim, elegantly designed combination iPod, Internet communications device and mobile phone. And in classic Apple fashion, it's been marketed to the max.</s>Unidentified Man: This is how you turn it on. This is your music.</s>WENDY KAUFMAN: This ad, for example, touts the ease of using the touch screen display for things such as listening to music or sending e-mail.</s>WENDY KAUFMAN: Unidentified Man #1: This is the Web. And this...</s>WENDY KAUFMAN: Unidentified Man #1: ...is a call on your iPhone.</s>WENDY KAUFMAN: Making sure that call and all the fancy features of the device work as promised is Apple's first challenge. Then there's the matter of price. iPhones are expensive, $500 to $600 depending on the storage capacity. Add to that the service fee. The least expensive plan is $60 a month. And another challenge...</s>Mr. MICHAEL GARTENBERG (Analyst, Jupiter Research): Certainly for the foreseeable future, if you want an iPhone you're going to have to be an AT&T customer as well.</s>WENDY KAUFMAN: That's right. As Michael Gartenburg of Jupiter Research explains, Apple and AT&T, formerly known as Cingular, have an exclusive deal that limits iPhone's service to those on the AT&T network. That means that roughly two-thirds of all current U.S. cellphone users, roughly 140 million people, will be shut out for at least two years. If they want an iPhone, they'll have to switch carriers.</s>WENDY KAUFMAN: And Charles Golvin of Forrester Research says most people won't; breaking the contract can cost $175 or so.</s>Mr. CHARLES GOLVIN (Forrester Research): It's relatively a small percentage of people who will - are so hungry for a new phone or relationship or so dissatisfied with their current provider that they're willing to eat that cost.</s>WENDY KAUFMAN: Another hurdle: The speed of the AT&T network itself. Golvin says it's not fast enough to handle many of the iPhone's coolest features.</s>Mr. CHARLES GOLVIN (Forrester Research): So that means that the promise of this mobile Internet and browsing on the go, it's going to fall so much short of what some people I think might hope for just because the network that's feeding the Internet content to the phone is fairly slow.</s>WENDY KAUFMAN: And what about e-mail? Some users will be put off by the iPhone's lack of a conventional keyboard. Rather than striking keys, there's a visual keyboard that you touch.</s>WENDY KAUFMAN: Tim Bajarin, president of the research and consulting firm Creative Strategies, cites another more significant e-mail problem, this one faced by many corporate customers.</s>Mr. TIM BAJARIN (President, Creative Strategies): The iPhone today will not support corporate e-mail, and specifically Microsoft Exchange server, and there's going to be going to be some frustration with that audience who clearly would love to have that phone but yet that feature and function will be available for it.</s>WENDY KAUFMAN: Apple plans to sell about 10 million iPhones by the end of next year, a figure most analysts say is realistic. No one believes the iPhone is likely to garner the 80 percent market share that Apple's iPod now has.</s>WENDY KAUFMAN: But the company's move into mobile phones is highly significant. Competitors are now working harder than ever to make their own super-smart musical cellphones, and the dynamic will forever change what we think of in a cellphone.</s>WENDY KAUFMAN: Wendy Kaufman, NPR News.</s>ANTHONY BROOKS, host: And you can check out our list of seven things to consider before buying an iPhone at npr.org.