Samsung out-specs iPhone -- and what it means

Samsung's just-announced "iPhone killer" highlights why Apple doesn't fully understand the game they've gotten themselves into with iPhone.

It's not just that Samsung's Ultra Smart F700 out-specs iPhone. The Samsung device has 3G support, a slide-out keyboard and a five megapixel camera, which are capabilities notably missing in iPhone. Like Apple's device, though, it has a touch screen and a diminutive size that roughly equals that of iPhone.

It's way too early to speak to the quality of the user experience, an area in which Apple has an unequaled track record. But if Samsung is smart enough to under-price iPhone (and it would certainly be difficult to charge more than iPhone), Samsung could have a hit on its hand. After the Appleistas trip over themselves to get iPhone, many, if not most consumers would look seriously at Samsung's device if its user experience is close to Apple's and it's a hundred or two hundred dollars less.

That gets to the heart of Apple's problem in the mobile phone space: It doesn't seem to fully understand the dynamics of the cellular business or that, this time, things are different.

For one thing, it doesn't have a first-mover advantage as it did with iPod. By offering excellent devices, a then-novel way of acquiring music and its customary marketing mastery, Apple's way was clear and it amassed an overwhelming market share lead with iPod.

In this case, though, Apple faces clever, well-entrenched, deep-pocketed rivals such as Samsung, Nokia and a long list of others. And it also has thrown itself into the middle of a highly complex competitive situation in which the cellular operators are pushing and shoving each other and making all manner of deals to offer a winning combination of devices, data services and bundles.

For instance, assuming the Ultra Smart F700 is offered in the U.S., AT&T (nee Cingular) would be foolish to not sell it. After all, not everybody will want to pay $500 for the under-powered iPhone and Cingular could attract and retain more cost-conscious, less Apple-obsessed customers with a device such as this. If Cingular doesn't carry Samsung's device, T-Mobile could pick it up and rip customers away from Cingular just that carrier is about to belatedly unveil its 3G network.

Apple has been extremely demanding with Cingular, dictating how iPhone will be sold, what it will cost and so on. If it demanded that Cingular not carry competitive devices, it may well hurt Cingular more than it will help.

The only thing that isn't clear is whether Samsung will offer a CDMA version of the phone that will work on Verizon's and Sprint's networks. If it does, it would be a good defensive measure for those carriers who could lose current customers to those migrating to Cingular and iPhone.

My point isn't that I have the answers to these questions but, rather, that Apple doesn't have the answers either. This is a new and complex business that Apple has gotten itself into and, while Apple's marketing abilities are without peer, it is in much swifter and deeper waters than perhaps it understands.

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