pace, Brian – I don’t think the iPhone has been nor will ever be a “flop”. But neither will Apple grow to dominate the cell phone industry the way it has the MP3 portable music player market.
Here’s how I think things will play out. For one thing, the iPhone will probably see a price drop. The markup on the phone (on the basis of components alone, not counting labor or licenses etc) is about 50% for the 8GB model, and Apple is running what can only be called a scam with regards to battery replacement. Only the Apple true believers will tolerate this, and that’s a miniscule audience compared to the market size (for reference, Motorola sold about 10 million RAZR phones in third quarter 2006 alone).
It’s also pretty obvious that a video-iPod using the iPhone multitouch interface is inevitable. The question is, will Apple sell a WiFi version, too? A device that does everything that iPhone does – except for the phone – would be a supremely compelling purchase. Especially with Wifi and ditching EDGE in favor of EV-DO. Of course, Apple would need to permit users to install third-party apps – like Skype – for it to really catch on. Imagine for a moment just what you could do with something like that. It would be a VOIP-phone, a handheld PC, chat device, video player, everything. Personally I think that device convergence is impossible; no matter what happens, you always will have to carry two. Let those be your cell phone and the uberPod. That might be a potent enough combo to banish notebook PCs to… well, the desktop.