A month-long spat has led the company to cautiously open its handset.

When the iPhone hit the market this past summer, consumers lined up outside Apple stores to snag the first models. But those weren't the only lines. Developers queued up as well, eager to roll out new applications targeted at this breakthrough device.

Who knew that would be the start of a six-month game of cat-and-mouse, ending ultimately with Apple's announcement that it will deliver the first formal iPhone software development kit (SDK) in early 2008?

The convoluted saga demonstrates the potential staying power of the iPhone, thanks to an enthusiastic, vocal user and developer community that wants the device to be totally open. It shows how even a savvy marketer such as Apple can misread the market in an attempt to benefit from a “walled garden” approach to mobile devices and content.

The situation also highlights the challenges that mobile app developers face in a market where new phones arrive almost daily and device-makers and carriers increasingly vie for control of the application deck.

“Current application development for cell phones is burdened by the huge number of handset configurations out there,” said David Chamberlain, principal wireless analyst for In-Stat. “Your app needs to run on phones with hundreds of different screen sizes, screen resolutions, hardware button configurations, processor speeds, storage capacities, etc. It's a complete nightmare.”

The iPhone apps story starts with Apple's decision to not release an SDK as it launched the new device. That did nothing to discourage enterprising developers, who quickly hacked the iPhone to, among other things, accept third-party applications. All sorts of apps not on the original iPhone — instant messaging, games, ringtone-makers, voice over IP, voice recording and more — were all made available by those developers as native applications.

But with the release of the iPhone 1.1 software upgrade this fall, those apps were gone just as quickly. Apple not only closed up the holes that let hackers unlock the iPhone for use on other networks, it changed its underlying code to break the third-party apps that had been built up to that point.

Steve Jobs, CEO of Apple, infamously pointed to concerns over “bringing down [AT&T's] West Coast network” as the reason not to allow third-party apps. But it is more likely that his desire for a consistent user experience — for the device itself and the applications on it — led to Apple locking down software development on the iPhone.

“You don't want your phone to be like a PC,” Jobs told The New York Times when the iPhone launched. “The last thing you want is to have loaded three apps on your phone and then you go to make a call and it doesn't work anymore. That doesn't mean there's not going to be software to buy that you can load on them coming from us. It doesn't mean we have to write it all, but it means it has to be more of a controlled environment.”

But the customer uproar over the lockdown eventually wore out Jobs and Apple. In mid-October, Jobs said Apple plans to deliver a formal iPhone SDK by February. He said Apple was focused on opening the iPhone while limiting its exposure to mobile viruses and attacks. One possible approach, he said, would be to require digital signatures. “While this makes such a phone less than ‘totally open,’ we believe it is a step in the right direction,” Jobs wrote in a blog post announcing the SDK.

Until then, Apple is encouraging developers to target the iPhone by building Web 2.0-style applications specifically targeted to the iPhone's Web browser, which is built on the same code base as its Safari desktop browser. It recently opened a directory of browser-based iPhone applications at http://apple.com/webapps, including a mobile Facebook application and a banking app from Bank of America, among others. But those apps pale in comparison to native apps.

While third-party iPhone apps are on their way, it's not entirely clear if Apple will try to keep the distribution model under its thumb. One approach would be to tie the device to one carrier and release only approved apps through controlled channels — similar to what T-Mobile has done with the Sidekick. Apple's controlled channel would likely be its iTunes store, which already sells ringtones and games in addition to music. Phone apps would not be a huge conceptual leap.

“There may be [application] certification requirements for security reasons, or Apple may choose to only allow application downloads via iTunes to provide a simple one-stop shopping experience and/or to get a cut of the revenue,” said Avi Greengart, wireless analyst for Current Analysis. “But at this point, that's just speculation.”

With Apple and the iPhone, speculation and rumors are almost a cottage industry.

NATIVE VS. WEB APPS

Native iPhone applications have several advantages. They can take full advantage of iPhone user interface conventions, including the ability to be installed and accessed via a phone-top icon. They run in stand-alone mode rather than within a Web browser. Perhaps most importantly, they can work offline instead of using a network connection for access.

Web apps have advantages, too. Development is faster and less complex. They can leverage existing Web resources. A single Web app can theoretically run on any cell phone Web browser. Most interesting applications these days are network-based anyway, so offline access is less important.