I just returned from my annual trip to visit my inlaws in Hong Kong. Last year I noticed that it seemed like nearly all of the teenagers had both a mobile phone and an MP3 player on lanyards around their necks. This year, however, I noticed that many of the teenagers have instead upgraded to MP3-capable phones, in particular, the Sony-Ericsson Walkman W550i, W800, and W900i models. Although I think that the iPod has never been as popular in Hong Kong as it is in Vancouver, I thought this shift was interesting. I really like my iPod nano, but would prefer the convenience of carrying a single device. Rather than purchasing a Walkman phone, I would prefer to buy an MP3-capable phone from Apple. What do you think about the future of Apple's iPhone project?

First, it is important to clarify that Apple's "iPhone" is merely a rumor at this point and has been for several years. The rumor reached a crescendo late last summer, and the phone released on September 7, 2005 ended up being the Motorola-branded ROKR, which has its internal storage artificially restricted to 100 songs and met mixed reviews. However, it is frequently noted that Apple registered the domain name "iPhone.org" on August 20, 2002 and trademarked "iPhone" in the UK on October 21, 2002, so it is clear that at least at one time, Apple had some interest in the term "iPhone", either for a hardware or a software product, if not an Apple-branded phone, perhaps an addition or upgrade to iChat.

More recently, according a report on NewRatings.com published December 16, 2005, Morgan Stanley published a research note the same day that states Apple is "likely to make announcements relating to iPhone, broad digital content and digital living room focused hardware in the upcoming year".

Speculating on rumors often is fruitless, but your observation is insightful nevertheless. Hong Kong combines a generally highly educated and affluent population with geographical proximity to Japan, Taiwan, and the Shenzhen Special Economic Zone in China, where many computing products are manufactured, and as a result, may adopt new products and technologies earlier than the North American or European markets.

From a practical standpoint, it does seem to make sense to add music playback capabilities to a mobile phone, as they are both portable audio devices, and certainly it would be more convenient to carry a single device to make phone calls and listen to music than multiple products. At the very least, it is easy to argue that music playback capability seems at least as logical an addition to a mobile phone as a camera, if not more logical. Some might even argue that adding music playback capability to a mobile phone is more logical than adding video playback to the iPod series.

However, "convergent devices" often end up being less of an "all in one" solution to multiple "problems", and instead end up performing several tasks poorly, so one also could easily argue that it would be better to have separate devices that each perform a single function well. For example, the majority, if not all, mobile phones with integrated cameras tend to be bulkier than those without cameras and take photos that are far inferior to those taken by dedicated digital cameras. Likewise, mobile phones that have been designed to be both a portable gaming device and a mobile phone tend to be awkward to use for both functions, and as a result, are far weaker together than they would be as separate devices.

This doesn't mean that Apple couldn't design a mobile phone that performed both tasks well. It is a serious undertaking, but certainly not one beyond the capabilities of Apple's industrial and interface design teams.

However, there are issues with the mobile phone market as well that extend beyond hardware and software design.

One issue is that Apple typically wants to be able to control the entire user experience, including hardware, software, and services. The company's current digital music initiatives -- the iPod, iTunes, and the iTunes Music Store -- are beautifully integrated, which makes the user experience far stronger than any of those components would be separately. If users were required to use third-party software to manage music files, and retrieve their own music from various sources with varying rights and usage, it is doubtful that the iPod would be as successful as it is currently.

For an "iPhone", assuming Apple would still want to have complete control over the user experience, the company would have to either lease, buy, or build a cellular network, which would be a vastly different undertaking from their current initiatives. This isn't to say that it wouldn't be possible, but it is an entirely different type of operation.

Another issue is that the market for mobile phones in Hong Kong, and other "Asia-Pacific" countries, and the market in North America is quite different. Mobile phones are typically sold at full price upon release in Asia and generally inexpensive plans or prepaid minutes are purchased separately, whereas in North America, phones are subsidized or given away with plans tied to far more expensive multi-year contracts. This is quite different than the market for the iPod, where Apple makes a large amount of money selling the iPod and a small amount selling songs through iTunes. Assuming that Apple would be interested in becoming a carrier to make money selling songs directly via the phone, as well as make money selling the hardware, entering the mobile phone market, at least in North America, would require a major change to Apple's profit structure.

Ultimately, like all rumors, one will simply have to wait and see if the rumored product is released, and if so, how Apple chooses to address the various issues that affect the product category.