back to article Apple takes the operator's shilling

Apple's new iPhone is faster, better and cheaper than its predecessor, but the low cost is achieved by taking a subsidy from the network operator: a business model that Apple rejected last time, and one that will drive the unlockers quickly out of business. Most mobile phones are sold to operators and retailers - Nokia's biggest …

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Unlocking

Yeah, I'm a current iPhone customer and I am gonna upgrade to the 3G version (despite it not being free on my lowly £35 a month contract!)

However, what I'm not happy about is that O2 are gonna unlock my v1 iphone, despite the fact that they will be cancelling my contract (so that I can take up anew 3g one) and I have paid full price for my phone.

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Anonymous Coward

PAYG

This article might make more sense if the iphone wasn't available on pay-as-you-go, which it is, from O2. No mention of what it'll cost without a contract yet, but it'll be a ready supply of phones for the unlockers.

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Jobs Halo

PAYG

Hasn't the 3G iPhone O2 PAYG cost been rumored to be the same as the original iPhone cost (£269)?

If so, it's all pretty straightforward, if you are on a tariff from another provider (I get a half price deal from T-Mobile so I'm staying put) you wait for your shiny new free "upgrade" phone to arrive, unlock it, stick it on eBay and use the profits to pick up a PAYG 3G iPhone. No doubt Jailbreak and Unlock tools will be available for the 3G iPhone within minutes of it hitting the stores, so unlock your shiny new 3G iPhone and away you go.

Slightly convoluted of course, but essentially if you don't mind the hassle you can easily get a free upgrade to a 3G iPhone - regardless of who provides your mobile tariff.

Thanks Steve!

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Dead Vulture

Get Real

"No end customer ever asked for a phone with a camera or Bluetooth."

You really believe this? Sheesh...

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Contract

The iPhone will also be available in Australia via 2 mobile networks (unlike 1 in the Uk/USA), and will offer contract or PAYG too. Also in Australia as there are laws which forbid operator lock in, not only can you buy out of the contract, but you can also pay around 30 pounds to get the phone unlocked to any carrier too!

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about payg

@Chris

You mention that O2 have given a price for the PAYG iPhone - during the keynote Steve Jobs stated that the price of the 3G iPhone would be a maximum of $199 worldwide.

I'm very interested to see what actual price O2 do end up quoting for PAYG because I'm sure it will conflict with what Steve has said. I actually believe O2 didn't have a clue that Steve was going to say that about the worldwide maximum price and In light of this I won't be surprised if O2/Carphone Warehouse withdraw from offering the iPhone on PAYG

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Jobs Halo

Sustainable?

"But in a year or two, when customers start looking to replace their handsets or switch networks Apple is going to need a product that will appeal to their new customer: the network operators, rather than the man on the street."

If the product does not appeal to the man (or woman) on the street, there will be little interest and the network operators won't be able to sell many. Consumers demand will drive sales - Need, Feature, Benefit.

Two things that will be interesting:

1) After a contract ends, don't consumers have the right to have the phone unlocked? A large 2nd hand unlocked iPhone market could appear?

2) How long will apple only supply to O2 - it's not sustainable in the long term

I'm a Vodafone customer, just out of contract. I won't lose out too much by getting an iPhone. Many others will be locked into 12 or 18 month contract, Apple can pick up new customers as contracts expire - perhaps this will help them deal with shortages when the phone appears (i.e. slow growth to match supply). In the short term, it might be a good strategy, I don't see it as sustainable however - 02 will not be able to cope if the product is really desirable (e.g. compare iPod sales to other MP3 players).

I don't own any Apple products (aside from Quicktime - which is free), I'm being tempted...

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Tim

Bluetooth and a Camera

You say that no customer has ever asked for bluetooth or a camera, but I am certainly glad its there. I just lament the loss of the "always on" led that used to come with camera phones. Yeah it devoured the battery life, but it came in useful on countless occasions.

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SIM Free option?

What is odd here is that unlike the other phone manufacturers Apple is unwilling, or unable, to sell a SIM free phone directly to the customer.

Has Apple managed to get themselves into a worse situation than the more established phone suppliers or is this all about their control over the end user experience? E.g. Visual Voicemail being available.

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Paris Hilton

No buying of handsets just for unlocking...

So unlocking the new PAYG version coming out on O2 in the UK is going to be different from the first generation in what way?

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Jobs Horns

Subsidy model

The article makes it sound like Apple has made its U-turn on the subsidy model because it was unhappy with sales so far. Isn't this just an extension of their strategy of high initial price, followed by rapid price cuts? They've already rinsed out everyone who's willing to pay for a handset, and now they're targeting the crowd who think that locking themselves into a pricey extended contract means "getting a free phone".

Personally, I'd be quite happy to shell out good money for a phone if it did everything I wanted. The original iPhone came close, and the new 3G model is perfect except for one thing. If "no end customer ever asked for a phone with a camera", then allow me to be the first - I want a phone with a decent camera, dammit!

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Agree..... disagree

"Apple is going to need a product that will appeal to their new customer: the network operators, rather than the man on the street."

Although a detractor of the high-priced, lock-in iPhone 1.0, I am carrying an iPod and mobile phone. Now my employer has taken an o2 corporate system, I'd like to choose my own handset for only one reason, less items in my pocket and I like my iPod. therefore iPhone 2.0 contractless or PAYG would be excellent. Business contract upgrade ideal!

Now these issues are possible, due to Apple's relaxation of the grip around the business model, I'm a potential customer rather than a fervent detractor. If the operator didn't make the iPhone 2.0 available, I wouldn't be in the market for any other 'equivalent' smartphone. So operator, give me the apple-candy or I don't purchase your wares! How does that fit in with the authour's statement?

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It's the sheeple's fault

Yep, it's the fault of the sheeple for not seeing through the silly "free" offers. If people had been prepared to tell the operators to "F*** off" and go for sensible deals then we would have handsets with the features WE want, on tariffs that WE are happy with.

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Jobs Horns

The iPhone was NEVER available for FULL price without a contract

Please can anyone tell me, where I could get the iPhone without a contract for the full price? In the USA it was only available - legally - for AT&T Customers. In Germany and Austria you had to be T-Mobile customer...

Nothing changes really, except that it is more difficult to unlock an iPhone.

Apple should sell the damn phone in their stores without a contract.

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But then again

But then again since all iphoneys come complete with self spying capabilities , only a total tool would buy one !

As for unlocking , now that ultra thin sim wafers are available to suit all common garden variety units , which then allows the user to use out of country units at cheaper local call rates , only a silly tool would fall for that kind of brain dead in the headness !

Truly an Ifan and his money are quickly parted and sucked up in vast quantities by these pirates sailing in from Curpertino California way !

Sad really , when you think about it , let the blood sucking out of a stone feast continue , as the other one point one billion new users avoid that dumb trap !

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Paris Hilton

Freebie

A year ago I got a good deal from my operator Three to stay with them, but they couldn't supply a smartphone I liked. In the end the deal was so good I opted to buy a Sony-Ericsson P1i myself, which still worked out cheaper than a standard contract and fancy phone elsewhere.

I got a call from Three yesterday, saying my contract was due to expire. Now I'm perfectly happy with it, and my P1i, and would have willingly signed up for a further 12 months without incentive, but basically the guy on the line was offering me a 'free' upgrade handset, gratis. At first I declined, but he said I may as well and keep it as a spare, eBay it even, so I finally agreed as it seemed stupid not to.

So effectively Three have given me something I didn't need, or want, for no reason I can see other than the cost of it is already budgeted into their business model and so they can just hose them around willy-nilly.

Paris 'cos I bet she gets lots of stuff for free.

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@russell

"I'm very interested to see what actual price O2 do end up quoting for PAYG because I'm sure it will conflict with what Steve has said."

From the O2 website, yesterday:

"Best of all, the new 8GB iPhone won't cost you a penny on our £45 and £75 tariffs. And it's just £99 on our £35 tariff and new £30 tariff."

Doesn't seem to conflict at all with what Steve said.

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Where to Buy

"Apple is going to have to start selling the iPhone to O2, rather than to the end customers, just as all the other manufacturers do."

Well, according to the Apple website, you can get it from O2 or Carphone Warehouse, who say it'll be available on O2. No mention of it being available to the end customers, from Apple stores.

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Anonymous Coward

@AC re PAYG

No need for any convoluted unlock process. Buy PAYG and use it for a couple of months then ask O2 to unlock it as they are legally obliged to do in the UK when you transfer to another service.

HTH

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Thumb Down

"No end customer ever asked for a phone with a camera or Bluetooth"?

I've absolutely no idea how you contrived this "fact"!

I'm lukewarm on the camera, although it's nice to have, but Bluetooth is an absolute requirement for me, for several reasons (wireless laptop docking, BT handsfree in the car, GPS dongle docking). No BT, no buy.

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Silver badge

Phones, Cameras, and Bluetooth

These things are stupid. A phone doesn't need to be anything other than a phone. The people who "believe" these things are useful have simply been brainwashed by the marketing guys.

P.S. The one upshot of camera phones is their ability to capture the unexpected nudity that historically only presented itself when you didn't have a camera. It would have been great to have a camera phone in college but now there's no need for it It'd be creepy (for them) if I was hanging out at the parties where college girls take off their clothes for no reason - it's a young persons game.

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We don't need no stinking title!

So... am I to take it I can get a PAYG iPhone from O2 and subsequently unlock it so I can use my cheap-as-dogshite T-Mobile sim in it?

I'm not giving up my 3p texts messages, damn it; but my RAZR is rusting.

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@ oxo

He is right. Perhaps he didnt use the right words, but before there were Bluetooth and mms, there wasnt a push to add these from the consumer... There was however a push from operators and the retailers for more revenue streams. Accessories and new services that mostly use existing infrastructure are 2 ways of doing this. Once you have that second revenue stream, you can either sit back and count the profit, or lower your headline rates.

Now they're "standard" we the consumer might insist... But until the first mobile Internet phone came out, noone wanted one either.

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bluetoot

Anyone know which profiles are included ?

I want Stereo audio profile for starters ( something the original iphone did not have ) so i can stream music to my bluetoothe stereo speakers..

and i want bluetooth file transfer !!!!. ( something that was blocked on v1 as well. no way to send a file, like exchange a ringtone with a buddy )

can the v2 be used as external harddisk ? I want to be able to copy files to its internal storage and use it as a memory stick as well ... This needs to work without itunes. plug it in and a disk is detected. The ipods can do that.

is there a microsd slot to expand the memory ?

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Gold badge

PAYG

PAYG will be expensive if you want to use this phone to its full potential.

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Stop

App store

The key thing here is that Apple only allow 3rd party applications to be sold through their yet to be revealed online store.

They've realised their revenue share with the network operators was never going to be as great as the revenue from the apps that people put on their iphone. Those apps will drive demand for the device. The networks have no control over that channel and will find their bargaining power reduced as a result.

@Adrian Jones - PAYG prices haven't been released, and as Russell noted, will undoubtedly be higher and therefore contradict what Steve said.

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@ David Cornes

I think it may be something to do with the new 12/18 mnth contract you've just signed up to be tied into.

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France - unlocked iPhone, full retail

http://apple20.blogs.fortune.cnn.com/2007/11/28/frances-956-iphone/

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@ Heystoopid

"Sad really , when you think about it , let the blood sucking out of a stone feast continue , as the other one point one billion new users avoid that dumb trap !"

Ummm... the aphorism that I THINK you're referencing is, "You CAN'T get blood from a stone," so... to what "feast" are you referring?

("Sad really , when you think about it," however, may be accurate, since I'm trying to use logic on a "Heystoopid" post, which even I'LL admit is pretty sad!)

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Happy

Well done Apple

Well it's clear what Apple did : they wanted to get as much as they could out of the early adopter community and now that they have, they're going for the rest.

Very smart tactics from them and of cousre the early adopters will feel even more abused but can you really feel sorry for people that are so gong-ho about technology that they're willing to wait in line for it (for hours if must be) and spend rediculous amounts to have something that in no real apparant way improves their lives ?

Go get them, Tiger.. no wait.. Leopard !

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Coat

I'll have the next on on order

The operators where I lived simply waited until the dust had settled. They now get the better deals, the 3G model is announced for the 11th of July.. I needed an extra smart phone (mainly as surrogate Blackberry) and I spent 1 (one) day with the Nokia E90 which doesn't want to talk to a mailserver with self signed certs, When I then also tested our companies' optical product it failed there too - exit E90.

I did some testing with the iPod Touch I have, works like a charm. Well, as it's going to be a company phone I have basically run out of excuses not to, also because it is one of the simpler ways to demonstrate our products.

I like the phone, but it shares with all new phones the feature that it makes you feel like a grubby pig because as soon as you as much as watch it it has fingerprints, no matter how thorough you scrub in the shower.

I leave you to ponder the various permutations of grubby and shower based scrubbing, fnar fnar.

Mine's the dodgy mac.

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Apple know exactly what they are doing . . .

. . . and any journalist who writes an article from the position that they know better cannot come to sound conclusions. It's ludicrous. Apple's execution has been flawless so far. There is NO CONNECTION between the business model for iPhone 1 and iPhone 2. iPhone 1 was a throwaway product for Apple to play hardball with the carriers, to leave the keys under the mat for the hackers to find the flaws, and to finish developing the full product. iPhone 2 is the real deal.

This time round, unlocking will be one thousand times harder. It may never happen in a form accessible to the mass market. This time round Apple services are in place that form an integral part of a fully functioning iPhone.

O2 are clueless. They have dropped the ball by offering PAYG, and I expect Apple have called up and said "trust us - you don't want to do that". I think they'll pull the offer. They're worried they won't be able to sell enough iPhone 2's. I've got news for them. They won't be able to BUY enough iPhone 2's.

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@Adrian Jones

Russell was talking about the Pay As You Go prices. The prices quoted on the O2 website are for contract.

We'll probably have to wait until launch day for the PAYG prices!

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Joke

Logic?

"The company has had some success, but not as much as it would have liked. After all, you have to be a lot better than the competition when it has a price label marked "free"."

Windows must be the mutts nuts then.

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@App store

"The key thing here is that Apple only allow 3rd party applications to be sold through their yet to be revealed online store."

The key thing here is that Apple will allow 3rd party applications to be GIVEN AWAY FOR NOTHING or sold (if sold then 70% of retail price goes to developer) through their yet to be launched online store.

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@is there a microsd slot to expand the memory ?

Apparently not according to the published specs and including one would go against everything Apple have done with iPod's and the iPhone to date. You want more memory then buy the bigger version or stream the data from the "cloud" ... a good example is the Mobile Me (dot Mac replacement) which in addition to synchronizing contacts, bookmarks, calendars etc also gives you online access to 20Gb of storage so you could ... for example put films, tv clips, music, pictures etc up on your "me.com" online storage and access it from your iphone.

Plus people like slingbox will put out iphone viewers to stream content from home media boxes.

With this "all you can eat" data tariff it will be interesting to see how O2 cope with, what will be, a huge increase in demand for streaming media that the iphone SDK will allow development of "viewers" etc. My bet is that they will either traffic-shape the content or start charging people for "misuse" of the unlimited data network!

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Unhappy

@ App Store

I have actually read news reports celebrating the App Store because there are few, if any, mobile application marketplaces that let the developer keep anything near 70% of revenue.

Developers can also offer the application free, and use an advertising funded model, and keep 100% of revenue.

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"This time round, unlocking will be one thousand times harder."

Aaa-ha-ha-ha-haaa-haha! Bollocks. No it won't. There hasn't been a device of this ilk made yet that can't be hacked some way or another, and I don't reckon this one is going to change that.

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Tom
Silver badge

@ Richard

For an app to be on the app store, the developer must be part of the iphone developer program.

To become part of the iphone developer program, you can either join the standard program, or the enterprise program.

To join either, you must live in the US, stump up $99/$299, AND have your application approved by Apple. There is no reason given for rejection...

Once in the program, a standard developer will be able to write apps in Xcode, and submit them in source form to apple. These are then vetted by apple, and if approved, placed in the itunes app store. They can install their app directly on only one registered device.

If in the enterprise program, you can deploy to your 'enterprise' handsets directly. To get in the enterprise program, you have to be 'enterprisey' - IBM, Accenture or Siemens? Sure. Bobs Software House? Unlikely.

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This customer wants a better camera and better bluetooth

Apple seem determined not to add proper bluetooth profiles, a camera worth a damn (with a flash) or MMS etc.

If the networks are the customers now and make them add more functionality, then GREAT!

Because I want that stuff. That's the three things that annoy me about my iPhone every day.

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Jobs Halo

two five nine

O2 insiders claim the PAYG jesus-blower will be priced at £259.

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Jobs Halo

I don't get it

So, Apple get the providers to capitulate to their demands and then U-Turn a year or so later?

This article shows a complete lack of understanding how Apple works. Features don't come from customer demand and they won't start coming from the networks. Features come solely from Steve Jobs, and his team.

If Apple had listened to their customers, we'd have MMS, copy/paste and video conferencing but also be missing several nice features (like push-polling to apps) because we'd forced them to go for an open app install structure. Oh, and we'd have 35 minutes talk-time.

Apple have done brilliantly so far with the iPhone. I don't feel the need to tell them how to do it from here on in.

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IT Angle

<Ranty>

"Most operators will have a list of features, each of which is worth a specific amount of subsidy based on the revenue that feature will generate. One-button MMS, for example, cuts the price significantly, while a music player isn't really of interest unless it's linked to the operator's download service."

Didn't the fact that neither iPhone version supports MMS ring any bells? do you really think they left it out because it was 'just too damn complicated'? It was left out for the same reason that they don't plaster their computers with Intel stickers or preinstall crapware.

Apple is all about the user experience, and that experience includes not getting a surprise bill each month because you were stupid enough to send some pictures as 25p-£1.75 MMS's (Standard O2 rates), instead of free email attachments*

The whole premise of this Article is so badly flawed, the author so ignorant of how Apple operates, that I can't understand how it made it onto my beloved Reg unless it's purely to drive up ad revenue for the Friday night piss up**.

*the whole SMS thing is a load of bollocks too, the sooner the Telco inspired cash cows die a death through IM clients the better (watch the AIM part of the WWDC keynote and the part on background push notification to see how that's been implemented without slowing things down to a crawl).

**If so have a beer on my clicks

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Stop

Dream on FUDster

If allegedly competent author really believes Apple is about to kowtow to Network operators perhaps he should read up on how their Music business worked out for the Labels.

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Go

O O O2? Oh 2 strikes and out for O2?

To Ofcom:

OK, if O2 has been fined for 3G naughty haughtiness perhaps the next inspection could run on lines of "Ok O2, second strike on poor 3G, a bit of a monopoly on the iPhone therefore give your customers a 75% rebate. As customers paid 100% in currency it will be good for O2 to deliver to 100% in technology"

To O2:

Don't compromise your customers and get on with it (3G and iPhone functionality that is in this case).

To Apple:

If UK based O2 do the dirty take the contract somewhere else (anyone but Orange?)

To me:

Must get iPhone, possibly two. Fearing terrible contracts and constraints from O2 and massive unlocking potential somewhere down the line.

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@Tom

Umm, did you actually see the launch? One of the many applications demoed by Apple was to quote Macrumors ... "An independent developer, MooCowMusic from the UK developed Band that includes a virtual piano, drums, 12-bar blues "instrument", and a bass. All of the instruments sound very impressive and what you play can be recorded."

Note the "independent" and "UK" developer bit and this is at the iPhone 2.0 SDK launch !! Plus the Developer programme is currently Beta and hence has been restricted but it does not stop non-US people signing-up to the programme (just tried it myself).

Downloading the SDK is free and means that any developer can have a go at creating software which runs on a emulator ... just paying the small $99 programme fee gets you full Apple technical support (like their other more expensive developer programmes), ability to install direct on an iphone and the power of Apple's worldwide portal to host, promote and distribute your code. $99 for a great hosting arrangement and credit card processing (if you charge for your application!) .. peanuts ... sign me up!

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ZM

@Hans-Peter Lackner

I got mine from AT&T @ full price and didn't have to extend my contract for it. I very specifically asked the nice young woman at the counter if it would extend my contract and she told me "no".

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Stop

Bluetooth

Was actually one of two must-haves for me (along with quad-band). I find being able to my entire address book to the phone too useful too miss.

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MMS

Will someone please explain to me why folks care about MMS on the iPhone? Last time I checked, MMS came out of allowance. Free Unlimited email can contain as many pictures as you want. Any decent phone these days can do email.

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Unhappy

Maybe it was the wrong shilling?

http://www.pixentral.com/show.php?picture=1yfsqTTL7uXRSIWJ7Yf2k2SPOqqA2V

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