Activation Problems Put Damper on Kick-Off of Apple's iPhone 3G

Throngs of eager iPhone fans queued up outside stores in 21 countries around the world on Friday to get their hands on Apple Inc.'s new iPhone 3G, but activation problems dampened the fervor.

"It's such grief and aggravation," said Frederick Smalls, an insurance broker in Whitman, Mass., after spending two hours on the phone with Apple and AT&T Inc., trying to get his new iPhone to work.

In stores, people waited at counters to get the phones activated, as lines built behind them. Many of the customers had already camped out for several hours in line to become among the first with the new phone, which updates the one launched a year ago by speeding up Internet access and adding a navigation chip.

A spokesman for AT&T Inc., the exclusive carrier for the iPhone in the United States, said there was a global problem with Apple Inc.'s iTunes software that prevented the phones from being fully activated in-store, as had been planned.

Instead, employees were telling buyers to go home and perform the last step by connecting their phones to their own computers, spokesman Michael Coe said.

The iTunes servers, however, were equally hard to reach from home, leaving the phones unusable except for emergency calls.

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When the first iPhone went on sale a year ago, customers performed the activation procedure at home, off-loading employees. But the new model is subsidized by carriers, as is standard in the wireless industry, and Apple and AT&T, therefore, had planned to activate all phones in-store.

The problem extended to owners of the previous iPhone model. A software update released for that phone on Friday morning required the phone to be reactivated through iTunes.

"It's a mess," said freelance photographer Giovanni Cipriano, who updated his first-generation iPhone only to find it unusable.

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The iPhone has been widely lauded for its ease of use and rich features, but Apple is a newcomer to the cell-phone business, and it's made some missteps. When it launched the first phone in the U.S. a year ago, it initially priced the phones high, at $499 and $599, then cut the price by $200 just 10 weeks later, throwing early buyers for a loop.

Rollouts to other countries were slow, as Apple tried to get carriers on board with its unusual pricing scheme, which included monthly fees to Apple. The business model of the new phone follows industry norms, and the price is lower: $199 or $299 in the U.S.

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On Thursday, Apple had problems with the launch of a new data service, MobileMe. The service is designed to synchronize a user's personal data across devices, including the iPhone, but many users were denied access to their accounts.

At the flagship Apple store on Manhattan's Fifth Avenue, hundreds encircled the block ahead of sale time, which was 8 a.m. in each U.S. time zone. Many had bought the first iPhone, which debuted last year in the United States. The new model adds faster Internet access and a navigation chip.

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In Troy, Mich., 78 people lined up outside the AT&T store, which had sold out in 45 minutes, the Detroit Free Press reported.

Earlier a Federal Express plane carrying a shipment to the area broke down. "We do expect more phones tomorrow [Saturday]," Ken Gaffga, AT&T's Detroit area sales director, told the Detroit Free Press.

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Alex Cavallo, 24, was in line at the Fifth Avenue store, just as he had been a year ago for the original iPhone. He sold that one recently on eBay in anticipation of the new one. In the meantime, he has been using another phone, which felt "uncomfortable."

"The iPhone is just a superior user experience," he said. The phone also proved a decent investment for him: He bought the old model for $599 and sold it for $570.

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Outside an AT&T store in Atlanta, more than a hundred people had lined up.

Edward Watkins, a 34-year-old engineer and avowed "techno nut," said he didn't mind paying an extra $10 a month to the carrier to upgrade his phone.

"I'd pay an extra $30 or $40 a month for that. It's a smoother running phone. It's driving a Beamer as opposed to a Chevy Metro."

Fueled by bags of Doritos, three games of Scrabble and two packs of cigarettes, 24-year-old grad student Nick Epperson stayed up all night for a phone, after selling his old one online. When asked why he was waiting in line, he responded simply "Chicks dig the iPhone."

Earlier, the celebration at Japanese carrier Softbank Corp.'s store in Tokyo had swirls of smoke and a digital clock ticking away over the entrance, part of a rollout in 22 nations including Australia, New Zealand and Hong Kong.

By Friday morning, the line at the Softbank store had grown to more than 1,000 people. Softbank quickly said it had sold out, though exactly how many iPhones were available in Tokyo is unclear, fueling the fervor about the gadget.

The 8-gigabyte model costs $215 in Japan, while the 16-gigabyte version is $320.

Tomohiko Katsu, a 38-year-old banker, said he has rarely lined up for any product in his life but wanted to make sure he got the iPhone, so he began camping out Thursday afternoon.

"All the features come packed in a compact machine," he said. "It's really small for a mobile PC device."

Katsu shrugged off the criticism already popping up from some Japanese that the iPhone may be a bit heavy and bulky compared to cell phones common in this gadget-loving nation.

The iPhone's capabilities are less revolutionary here, where people have for years used tech-heavy local phones for restaurant searches, e-mail, music downloads, reading digital novels and electronic shopping.

The latest Japanese cell phones have two key features absent on the iPhone — digital TV broadcast reception and the "electronic wallet" for making payments at stores and vending machines equipped with special electronic readers.

But they don't have the iPhone's nifty touch screen or glamour image.

"Just look at this obviously innovative design," Yuki Kurita, 23, said as he emerged from buying his iPhone, carrying bags of clothing and a skateboard he had used as a chair during his wait outside the Tokyo store. "I am so thrilled just thinking about how I get to touch this."

Eager to put their fingers on an iPhone as well, hundreds of people lined up outside stores in New Zealand's main cities, where buyers could snap up the devices right as midnight struck and Friday began.

"Steve Jobs knows what people want," Web developer Lucinda McCullough told the Christchurch Press newspaper, referring to Apple's chief executive. "And I need a new phone."

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