Fascinating WSJ.com piece…
During a visit to Las Vegas last December for a rodeo event, Cingular Wireless chief executive Stan Sigman received a welcome guest: Steve Jobs.
The Apple Inc. chief stopped by Mr. Sigman’s Four Seasons hotel suite to show off the iPhone, a sleek cellphone designed to surf the Web and double as an iPod music player.
The phone had been in development by Apple and Cingular for two years and was weeks away from being revealed to the world. And yet this was the first time Mr. Sigman got to see it. For three hours, Mr. Jobs played with the device, with its touch-screen that allows users to view contacts, dial numbers and flip through photos with the swipe of a finger. Mr. Sigman looked on in awe, according to a person familiar with the meeting.
Behind the scenes in the making of the iPhone, Apple bucked the rules of the cellphone industry by wresting control away from the normally powerful wireless carriers. These service providers usually hold enormous sway over how phones are developed and marketed — controlling every detail from processing power to the various features that come with the phone.
Not so with Apple and Cingular. Only three executives at the carrier, which is now the wireless unit of AT&T Inc., got to see the iPhone before it was announced. Cingular agreed to leave its brand off the body of the phone. Upsetting some Cingular insiders, it also abandoned its usual insistence that phone makers carry its software for Web surfing, ringtones and other services. The deal also calls for Cingular to share with Apple a portion of the monthly revenues from subscribers, a person familiar with the matter says.
In another break with standard practice, the iPhone will have an exclusive retail network: The partners are making it available only through Cingular and Apple stores, as well as both companies’ Web sites.
Mr. Jobs once referred to telecom operators as “orifices” that other companies, including phone makers, must go through to reach consumers. While meeting with Cingular and other wireless operators he often reminded them of his view, dismissing them as commodities and telling them that they would never understand the Web and entertainment industry the way Apple did, a person familiar with the talks says…