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Computerworld - As expected, Apple on Monday revealed video chat functionality on its newest smartphone, the iPhone 4, which features a front-facing camera, although it only works over Wi-Fi.

The video-calling software, called FaceTime, was announced by CEO Steve Jobs, in accordance with his "one more thing" tradition of revealing blockbuster technologies at the very end of his keynote addresses at the annual Worldwide Developers Conference.

In addition to only working over Wi-Fi, FaceTime only works from one iPhone 4 to another. Users can automatically switch from the front-facing camera focused on their faces to the rear-facing camera -- to show others what they are seeing -- with a simple screen touch.

Analysts said Apple might reveal later whether Skype video calling and other third-party video chat software could be supported. Jobs said the FaceTime software will be made into an open industry standard, which could, theoretically, allow connections from devices other than Apple products.

But the fact that FaceTime will work only on iPhone 4 devices could be a way of building some product cachet as the concept catches on, said Kevin Burden, an analyst at ABI Research.

"We've had some video-chat and video-calling capabilities before, but now Apple is saying, 'Here is FaceTime, and only you iPhone 4 people get to use it,' which could help build a user community, since some people like being in a somewhat exclusive group," Burden said.

However, Burden said, because FaceTime will only work within iPhone 4 products and only with Wi-Fi, enterprise interest in that functionality will be severely limited. "[Apple is] saying, if you want this functionality you have to invest in this technology," Burden said. He said he doubts that a large company would want to invest in the iPhone 4s to get video chat functions, since they won't interoperate with other devices.

"I don't see any major benefit to business users with FaceTime," added Jack Gold, an analyst at J.Gold Associates. "Even for consumers, after using it once or twice, will you continue to use it?"

But other analysts say FaceTime will catch on, especially with consumers at first. "I don't think enterprises are clamoring for [video chat] right now, but consumers drive the enterprise, and it will take off," said Ken Dulaney, a Gartner analyst.

"Businesses could use [FaceTime] in some cases," he said. "Maybe doctors."

Ezra Gottheil, an analyst at Technology Business Research, said Apple seems to be positioning its FaceTime and iPhone 4 front-facing camera to a wide buying audience, as opposed to only consumers or business users.

"At this point, it looks pretty consumer-oriented and [works] only between two iPhone 4s," Gottheil said. However, the technology could have wider adoption if the front-facing camera is included in the realm of APIs that developers could link into third-party video chat programs, such as Skype. "Restricting it to iPhone 4 users is [Apple's] way of getting started," he said.