Rivals see iPhone as the one to beat in hardware, software, marketing

"Yes, the iPhone is a smart phone, but it isn't that fact that makes [the] iPhone successful," added Greg Clayman, executive vice president for digital distribution and development at MTV Networks Co. in New York. "A lot of phones do things better than iPhone," he said, but because of its popularity, "iPhone grows the market."

From Clayman's view, the iPhone has helped generate a huge spin-off effect, with many imitators launching new devices and applications that fragment the market. For a content provider like MTV, "the iPhone is just another OS to develop to, like Android is," Clayman added.

At retailer Best Buy Co., which recently began selling the iPhone alongside hundreds of other wireless devices, market fragmentation is beginning to pose sales challenges, said Mark Mosiniak, consumer technology manager at Best Buy Mobile.

"We find we don't know how to talk to customers sometimes," Mosiniak said. The current approach at Best Buy is to ask customers what they want a phone to do, whether it is for voice, e-mail, or access to music or social networking, instead of talking initially about a specific product. That's better than dealing with customers on a more technical level, he said, although some customers want a certain mobile operating system and a device with a touch screen and that works on a certain carrier's network.

"Customers can't really have one size fits all, but they don't know that," Mosiniak added. "I worry they'll wake up and want this stuff [with every feature in one]." He didn't say that the iPhone is the one phone customers ask for, saying simply about the iPhone, "It works."

Handango CEO Bill Stone said he recognizes that all kinds of customers, from the tech-savvy to newbies, want a retailer or carrier providing a new phone to "just make it work ... and the iPhone works, easy and simple."

While Windows Mobile runs on the phones produced by several manufacturers and has been around much longer than the iPhone, it inevitably gets compared to the Apple hardware and its Mac OS X-based operating system. "Win Mobile is efficient, but that's boring," said Nerde. "Win Mobile has so many great functions, but it just looks really, really boring."

Dave Strintzinger, chief technology officer at Brighstar Corp., which adapts applications to various devices, said Apple has helped the smart phone become a "fashion item." Apple has "sexed up the smart phone, and the others are slow to catch up," he said.