Jobs wants to put the 'baby Internet' to bed

SAN FRANCISCO (MarketWatch) -- Since Apple Inc. unveiled the iPhone four months ago, there has been much speculation about whether it will be more of an iPod or a cell phone.
But to hear Steve Jobs tell it, the device's strongest selling point may be neither.
As he touted the product to a gathering of tech industry executives this week [on Wednesday], Apple's (AAPL :
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AAPL118.77, +4.42, +3.9%) chief executive sounded most excited about the iPhone's Internet pedigree -- especially it's ability to download and play videos.
The iPhone comes equipped with "real versions" of the company's operating system and the Safari Web browser, Jobs said, which will allow Apple to deliver to consumers an experience that others have mostly failed to. "It's the Internet in your pocket," he said.
Even though cell-phone providers have spent billions to build out sophisticated networks to let handsets access the Web, "you can't do a lot with them," according to Jobs. "You get the 'baby Internet,'" he said. "People want to get the 'real Internet' on their phone," Jobs said.
If Jobs is right, Apple's move into the handset market may not hinge on how well the product can navigate the straits between two markets -- cell phones and portable media players -- that within a few years will likely become one.

That challenge is one reason many Apple watchers feel that the company's move into the cell phone market is fraught with risk.
At nearly $500, no one is going to buy the iPhone just for its handset capabilities.
If the iPod merely cannibalizes sales of high-end iPods, it may open the door to rivals like Nokia Corp. (NOK :
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NOK27.16, +0.69, +2.6%) and Sony Ericsson to slow iPod growth or even take market share. Both companies have added music players to their phones.
But if Jobs can change why people buy cell phones with the iPhone, just as he changed how people buy music with the iPod, he might take enough of the handset market share to keep iPod sales surging.
Jobs can spin with the best of them, so his touting of the iPhone's video download may be little more than shrewd product positioning.
During his presentation at the "D" - All Thing Digital conference in Carlsbad, Calif., Jobs managed to turn on its head the most common argument against the iPhone -- that it's lack of a keyboard will be a huge negative for consumers used to texting on smart phones like the Research in Motion Ltd. (RIMM :
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RIMM164.66, -0.67, -0.4%) BlackBerry and the Palm Inc. Treo.
Jobs acknowledged that the iPhone's touch screen will take some getting used to.
"It takes about a week; you have to learn how to trust it," he said.
But the feature will provide the device with "incredible versatility," because it allows the device to offer users different interfaces for its different applications.
To be sure, it's not that Jobs downplayed the product's music player capabilities.
The iPhone "has the best iPod we've ever made," he said.
Still, he acknowledged that Cingular Wireless, which will be the only carrier to sell the product when it begins shipping next month, took a chance by agreeing to carry the product before Apple even showed it to them.
"They took a gamble on us," because Apple has never made its own handset, "just as we took a gamble on them," Jobs said.
So why would Cingular, now a unit of AT&T Inc. (T :
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T40.98, +0.49, +1.2%) , do it?
Because "music hasn't been good on the phone," he said, and the company felt that partnering with Apple was their best chance of improving that experience.
If consumers agree, Apple's sales and stock price may continue to rise, and Jobs may once again look like a genius.