IPhone Introduced to Europe, Where Standards Differ

By ERIC PFANNER
Published: September 19, 2007

LONDON, Sept. 18 — Apple introduced the iPhone to Europe on Tuesday, hoping to entice consumers with a sleek design and the power of the Apple brand, even as it flouts some of the technological and marketing conventions of the European mobile business.

Steve Jobs was in London on Tuesday to announce that Britain would be the first European country to get Apple's iPhone.
Steven P. Jobs, the Apple chief executive, said the iPhone would become available to British consumers in November in an exclusive arrangement with O2, a mobile network operator owned by Telefónica of Spain. Similar deals are expected to be announced with the T-Mobile subsidiary of Deutsche Telekom in Germany and with the Orange unit of France Télécom.
The iPhone, which allows users to make calls, browse the Internet, check e-mail and play songs and videos by running their fingers over a touch-sensitive screen, has been a hit in the United States, where more than one million were sold in the first three months of its release.
But analysts say Apple may have a tougher time in Europe. They expressed disappointment that the iPhone to be sold in Europe was identical to the one in the United States, meaning that it would be unable to take advantage of faster European wireless networks for Web browsing and media downloads.

Mr. Jobs said Apple had decided against making the phone compatible with the faster third-generation mobile networks because the chip sets for 3G-compatible phones used up battery power too quickly. “They’re real power hogs,” he said in London, adding that it might take until late next year for the technology to advance enough to make a 3G iPhone.
Mr. Jobs said the iPhone would overcome this hurdle by relying heavily on Wi-Fi technology, which provides broadband Internet access for laptop computers and other devices, though only when they are stationary. When iPhones are on the move, they will shift to a mobile technology called Edge, which is also use by AT&T, Apple’s exclusive network partner in the United States.
But Matthew Key, chief executive of O2 in Britain, said Edge would be available in areas covering only about 30 percent of the British population when the phone is introduced in Britain on Nov. 9.

Also, 20 percent of British mobile users already have 3G-enabled phones, according to M:Metrics, a research firm. “There’s no doubt it’s going to be an obstacle for Apple,” said Paul Goode of M:Metrics. “You’re going to be asking people to downgrade in terms of capability.”
Apple is also going against the grain of the European mobile business by charging £269 ($538) for the phone in Britain, and locking customers in to 18-month contracts at monthly rates of £35 to £55 ($70 to $110). Typically, carriers discount even high-end cellphones in Europe.
“Sometimes you get what you pay for,” Mr. Jobs said.
O2 customers will also get unlimited data transfers with their iPhones, an effort to stimulate use of the mobile Internet and multimedia services.
T-Mobile planned to announce on Wednesday an exclusive agreement to sell the iPhone in Germany, according to a person briefed on the negotiations. There, the phone will sell for 399 euros ($555), this person added.
Carolyn Owen, a spokeswoman for Orange, declined to confirm reports that Apple would soon announce a similar agreement in France.
Europe has generally been a trickier place than the United States for Apple to do business. The company’s iPod music player has a roughly 20 percent market share in Europe, including 40 percent in Britain, compared with 60 percent in the United States, according to M:Metrics.
Regulators and consumer groups in several countries have also objected to some of Apple’s business practices.
This week, for instance, the European Commission plans hearings on a complaint that Apple’s iTunes online music store violates competition rules by charging Britons more than other Europeans for downloads. Apple has said its agreements with music companies and the organizations that oversee musical copyrights are to blame.
Despite Apple’s struggles in Europe, analysts say the region could still turn into a lucrative market for the iPhone.
Europeans, for instance, are more likely to opt for high-end multimedia phones than Americans. In June, according to M:Metrics, only 6 percent of cellphones sold in the United States were so-called smartphones, compared with 12 percent in Britain and 24 percent in Italy — a market where Apple has not yet indicated its iPhone plans.
Kevin J. O’Brien contributed reporting from Berlin.