Yeah, I suppose this would be a disadvantage for the iPhone because it is likely going to be a highly data intensive device. But Steve Jobs is probably the very best person to have behind a device like this. He's quite used to going against "big interests" (i.e., the recording industry) in favor of "customer experience."
I think you're right. I also don't think this will sink the iPhone, by any stretch of the imagination. But I'm also very happy to see the issue coming up.
The iPhone, as presented in the keynote address at Macworld Expo 2007, just makes it into the realm of the barely possible, much like the original Macintosh. Barely enough memory, barely enough battery, barely enough screen, barely enough processor power, priced just a bit too high and almost too small. The original iPod was like this. Just 5GB because of the tiny drive, only working with Firewire Macs, not as small as contemporary flash based players and the most expensive MP3 player made. They eventually turned that big old 1G iPod into the 1G nano as the price slowly fell, the product shrunk and the feature set expanded over a five year stretch. Just look at how the sweetest Apple products manage to mature as the technology opens up without ever pushing the price too low.
They could not have done this phone any sooner and pulled it off. It is ground breaking in a way that integrates everything mobile computing has to offer. This product is a home run and they only want to sell 10 million of them to start, one percent of the market. Mark my words, in five years, the iPhone will come to define hottest segment of the personal computer market. The iPhone is first and foremost a wireless connected computer running a mobile version of OS X that supports iLife software. Eventually, it will also support iWork and become a full fledged connected PC.