There’s a theory favored by savvy Apple watchers that the first generation iPhone — greeted with such hoopla last year — was not actually the real thing.

That iPhone – the one that hundreds of thousands of Americans queued up to buy for up to $599 apiece, the one that Time magazine named the Invention of the Year, the one that six million people purchased before Apple finally stopped making them in May – was just a trial balloon floated by Steve Jobs to test the airwaves.

According to this theory, the real iPhone – the one aimed at the broadest possible market here and abroad — would start at $199, the magic price point at which consumer electronics devices seem to take off and become mass market phenomena. It would have built-in GPS location tracking, “push” e-mail, and wireless syncing with corporate enterprise networks. Most important, it would run hundreds of third-party applications available through an online App Store and operate over so-called third generation (3G) cellular networks that are two to five times faster than the one used by that first, prototype iPhone.

If this theory is true, then the real iPhone era begins on Friday, July 11, at 8:00 a.m.

That’s when the iPhone 3G goes on sale at Apple (AAPL) and AT&T (T) outlets in the United States and at the stores of Apple’s cellular partners in some 20 other countries around the world. (Strictly speaking, the era begins early Thursday, when the device goes on sale at 12:01 a.m. New Zealand time. Given how the Earth turns, that corresponds to 8:00 a.m. July 10 at Apple’s New York City flagship store and 5:01 a.m. at its Cupertino headquarters.)

Some things about the new iPhone haven’t changed. Physically, it’s almost identical to the first. Same touch screen, same dimensions — except for the back, which is slightly bulgier and made of black plastic instead of metal.

Conceptually, it’s still one device that combines three of today’s most popular technologies — cellular communications, portable digital music and wireless access to e-mail and the World Wide Web.

And the fundamental breakthrough is the same: unlike most devices that combine several functions and do none of them well, the iPhone puts together three must-have functions and does at least two of them better than they have ever been done before.

Early reviews suggest that the one thing the first iPhone was not particularly good at — telephony — is much improved in the second version, thanks to a redesigned audio system and, perhaps, improvements in AT&T’s network.

There’s still no physical keyboard, so devotees of RIM’s (RIMM) BlackBerry who were turned off by the lack of tactile feedback when dialing or texting on the first iPhone are not likely to be turned on by the second. The battery is still not user-replaceable, a shortcoming that may be even more important this time given the power demands of operating at 3G speeds. (One early reviewer who was getting nine hours of Internet use on the first iPhone clocked less than six hours on the second. See here.)

The built-in camera is the same under-2 megapixel device that can’t do video. There’s still no way to cut and paste text. And you are still married to AT&T’s cellular network for the life of a two-year contract, at least in the United States. In fact, the bonds of that matrimony may be even stronger this time around, given the way AT&T has set up the in-store activation procedure, and will cost U.S. customers at least $10 a month more.

There are many small improvements. You can search address books, delete e-mails en masse, set parental controls and save e-mailed photos. (These improvements will also be available to owners of the original iPhone as part of a free software upgrade.)

Investors will note that Apple has made major changes in its business model. Rather than testing the waters with a handful of exclusive contracts — first with AT&T, then with O2 (TEF) in England, T-Mobile (DT) in Germany and Orange (FTE) in France — Apple has gone global this time, with deals in six of the seven continents and more than 70 countries. To do this, however, it has had to largely abandon the arrangement — unique among cell phone manufacturers — by which carriers sold the iPhone for full price and kicked back a share of their monthly revenue to Apple, which was accounted for in monthly increments over the life of a cell phone contract (usually 24 months).

Steve Jobs was able to dictate these terms — quite advantageous to Apple — because the carriers recognized that being first to sell the iPhone would win them thousands of new customers. In most of the new markets Apple is entering this year, it is acting more like a conventional cellphone manufacturer, taking its (sizeable) profits upfront and letting the carriers subsidize the device with voice and data plans as costly as local market conditions will allow. (See Canada’s Rogers Communications (RCI), here for example, to see what kinds of problems this can lead to.) The price of the iPhone itself also varies widely, from as much as $888 for pre-paid phones in Italy to $75 in Mexico and free with certain data plans in the U.K.

Except for those costs, none of this affects the experience of the users.

For them, what will really distinguish this iPhone from the one that preceded it — and from every other smartphone out there — is the flood of software expected to be unleashed when the App Store opens on Friday. Apple has already demonstrated more than a dozen third-party programs for the iPhone, and over the next few months you can expect to hear about hundreds more: business apps that take advantage of the iPhones ability to “push” data down the network when it’s available (rather than when it’s requested); games that use the device’s accelerometer to navigate virtual space; shopping and social networking programs that use satellite tracking to tell you what shops or restaurants and which of your friends (or enemies) are near the spot where you are, right now.

In the end, every successful computing device is ultimately a software “platform,” a vehicle for the programs that give it its true value. This is where the real iPhone will stand out, and judging from the interest among the 4,000 third-party developers who have already signed up to write for it, it’s got a good headstart.

Even as Canada’s Rogers Communications and Germany’s T-Mobile compete to offer the worst voice and data plans for the iPhone 3G, Hutchison Global Communications on Monday unveiled what may be the best.

Hutchison (HTX), which stuck a deal with Apple (AAPL) in May to bring the iPhone to Hong Kong and Macau, will be offering customers a choice of two pricing plans:

• 8GB iPhone for HK$2,938 ($377) plus HK$188 per month ($24/month) for 500MB voice and data
• 8GB iPhone for free plus HK$498 per month ($64/month) for 2,200 minutes airtime and unlimited data.

“We believe the (minimum price) plan is comfortable enough for average data users,” a Hutchison spokesperson told the Dow Jones Newswire, adding that 500 megabytes will allow users to send 250,000 emails or browse Apple’s Web site 2,000 times. (link)

Bottom line in U.S. dollars: Including the cost of the phone, Hong Kong residents will pay between $955 and $1,532 over the life of a 24 month contract.

Some comparisons (all expressed in U.S. dollars for the equivalent of a 2-year contract):

• Hutchison in Hong Kong: $955 (500MB voice and data) to $1,532 (2,200 min., unlimited data)
• O2 (TEF) in the U.K.: $1,698 (75 minutes, unlimited data) to $3,588 (3000 min., unlimited data)
• AT&T (T) in the U.S.: $1,879 (450 min., unlimited data) to $3,318 (unlimited voice and data)
• T-Mobile (DT) in Germany: $1,366 (500MB data) to $3,374 (5GB data)
• Rogers (RCI) in Canada: $1,624 (150 min., 400 MB data) to $2,932 (800 min., 2GB data)

Last week, Steve Jobs announced that in “almost every one” of the 22 countries selling the iPhone 3G on July 11, the maximum price in would be $199 for the 8G model.

AT&T (T) went with the maximum. Some of Apple’s (AAPL) international partners are going with the minimum or close to it.

O2 (TEF), which carries the phone in the U.K., announced last week that the iPhone would be free for customers who sign up for one of its higher monthly tariff plans.

And on Monday, T-Mobile (DT) said that it is doing something similar in Germany, selling the iPhone for 1 euro to customers who select its highest monthly plan.

All three carriers are subsidizing the phone, of course, planning to take back in monthly fees more than they give away at point of purchase. In T-Mobile’s case, it turns out, a good deal more.

The chart below shows how much customers who buy the 8GB model end up paying at the end of a two-year contract for unlimited data in the U.S., U.K. and Germany. We’ve used the minimum tariff that yields the maximum subsidy in each country and converted everything into dollars. And we’ve chosen a two-year period in the U.K., although O2 offers an 18-month contract as well. (E-mail subscribes, click here.)

It should come as no surprise that these European carriers know what they are doing. T-Mobile’s 1 euro iPhone may look cheap compared with AT&T’s $199, but by the end of their contract, its customers have paid nearly 74% more.

O2’s free iPhone, by comparison, is a relative bargain; after two years, it’s only 12% more expensive than AT&T’s.

OK, there’s a new, faster iPhone 3G coming on July 11. But what about the 6 million people who bought the first one?

That depends when and where they got them.

According to reports Monday in Gizmodo and Ars Technica, citing AT&T sources, U.S. customers who bought an iPhone from Apple (AAPL) or AT&T (T) after May 27 will be allowed to trade it in for a new one with no additional charges (beyond the usual 10% restocking fee).

Customers who purchased an iPhone on or before May 27 are out of luck.

In the U.K., O2 is offering its iPhone customers a better — if more complicated — deal. You have to know what “top-ups” are to understand the terms offered on O2’s website here. It’s a little clearer as MacWorld UK explains it:

“Existing iPhone customers on the £45 per month contract will be able to upgrade their existing model to the new 8GB iPhone for free on July 11 by visiting the O2 Website. As we reported, you will need to sign up for a new 18 month contract. Existing customers on the £75 per month contract will receive the 16GB iPhone for free.

Current iPhone users on the £35 per month contract will be required to pay £99 to upgrade to the new handset and sign up for a new 18 month contract. They can, however, move up to the more expensive £45 per month contract and get the iPhone for free.” (link)

No word yet on trade-ins from Orange in France or T-Mobile in Germany.

Well, that’s one way to clear your shelves of excess inventory.

Eight days after O2 and Carphone Warehouse, Apple’s U.K. distributors, tried to rid themselves of unsold iPhones by instituting a 100 pound (37%) price cut on the 8GB model, the extra phones have all but disappeared.

On Thursday, Carphone, Europe’s largest independent mobile phone retailer, alerted advertisers that the sale had done its work: the 8GB models were gone and would probably not be replaced. Pocket-lint, a British gadget site, posted a copy of the message:

“Thanks to the most phenomenal response to the promotion, The Carphone Warehouse is now out of stock on the Apple iPhone. Please can you remove all reference to the iPhone promotion in your copy. We apologise for the short notice but would like to thank everyone who participated in the campaign. Carphone do not expect to receive any additional stock at this time.” (link)

The news follows a week of intense activity at both Carphone and O2 stores. According to a report last week in Britain’s Mobile Today, sales at Carphone’s flagship store on London’s Oxford Street had doubled from 30 per day to 60 after the promotion was announced. “We usually sell one or two a day,” one staffer told the website, “but yesterday we sold about 20 – it was like launch day again.” (link)

8GB iPhones were also sold out last week at O2 stores in Newcastle, Birmingham and London, but O2, the British arm of Spain’s Telefónica, hopes to replenish its supply. The 16GB model is selling for full price and is still in stock.

The price cuts were part of a global effort to clear inventory of first-generation iPhones in advance of the so-called 3G iPhone, widely expected to be announced in June — perhaps as early as June 9, according to a CitiBank report issued on Thursday.

Although Apple (AAPL) has been having trouble meeting demand for iPhones in its U.S. stores, sales have been sluggish in Europe. The reaction to the O2 and Carphone promotion suggest that it was price, not lack of 3G connectivity, that was hampering sales — at least in the United Kingdom.

In France, where iPhones have not yet been marked down, it costs 399 euros to buy an 8GB model (VAT included), or $626. As Silicon Alley Insider points out, it’s cheaper to ask a friend to pick one up on vacation in the United States, where the same phone sells for for $399, and unlock it.

It’s not clear what’s going on in Germany, where T-Mobile slashed 8GB iPhone prices 75% to 99 euros ($155), but it still seems to have plenty in stock.

Hard on the heels of a 75% price cut in Germany and 100 pounds (37%) off in the U.K. comes a report out of Paris that two high-level executives at Orange, the iPhone’s wireless carrier in France, have flown to Cupertino to figure out what to do about the excess inventory piling up on their shelves.

Under a headline that reads “L’échec de l’iPhone pousse Orange et Apple à renégocier” (”The iPhone’s failure forces Orange and Apple to renegotiate”), Les Echos reports that Orange executive director Louis-Pierre Wenes and marketing director Alice Holzman met with Apple COO Tim Cook earlier this week to hammer out a deal that could lead to a French price cut in the next few weeks.

The sticking point in the negotiations, according to Les Echos: Apple wants Orange to subsidize the cost of the device, as it does all its other models; Orange wants Apple, in return, to sharply reduce or drop entirely the cut it demands of each sale.

The meeting was the latest attempt to sort out the trans-Atlantic inventory imbalance has developed in advance of the second-generation iPhone (or iPhones), now widely expected to arrive in June. While the first-generation continues to sell briskly in the U.S. and has been in short supply in Apple stores for several weeks, European sales are reported to have slowed significantly in advance of the so-called 3G model.

On Friday, the London Times quoted Kathryn Huberty, an Apple (AAPL) specialist at Morgan Stanley, saying that the European carriers had become over-excited by iPhone hype last June, ordered too many, and are now facing “significant” losses on unsold stock.

Apple sold 3.71 million iPhones in the U.S. last year. According to Strategic Analytics, its European partners sold 350,000 through December, considerably less than the 500,000 to 600,000 they had hoped to sell, and only 300,000 in the first quarter of 2008.

Why Apple can’t just re-balance its inventory by redirecting Europe’s unsold iPhones to Apple stores in the U.S. that could use them is a mystery that has even Apple analysts scratching their heads.

“It remains puzzling that iPhone availability has been very scarce in Apple’s US stores, yet seemingly plentiful everywhere else,” Stanford Bernstein’s Toni Sacconaghi wrote earlier this month. “One explanation might be that because iPhone’s supply shortage came at quarter’s end, Apple chose to ship most of its iPhones to the channel, where units would be recognized as sold during the quarter, rather than re-building inventory in its US stores.” (see here)

Is he right? Is Apple manipulating its shipments to dress up its Q2 report? We’ll likely find out on Wednesday, when Apple reports its quarterly earnings and releases numbers on its domestic and overseas iPhone sales.

The iPhone has been very good to O2 in the U.K.

Apple’s (AAPL) British-accented partner reported yesterday that the iPhone has become its fastest selling device, helping the U.K. division of Telefonica (TEF) achieve its strongest quarter on record. Sales were up 9.5 percent in the last quarter of 2007 — the first to show the effects of the iPhone. O2 did not provide sales figures for the iPhone alone, but it did say that the device helped add 483,000 customers and 276,000 contracts to its roster.

According to O2, the iPhone has the highest satisfaction rating and the lowest return rate of any phone in its lineup. Moreover, iPhone users generate roughly 30 percent more revenue per user than the carrier’s average customer.

O2 also announced today that starting March 14, it will be offering the iPhone for sale in Ireland — only the fifth country authorized to carry the phone (after the U.S., U.K., France and Germany). For pricing details, see the Irish Times’ report here.

In remarks yesterday at a Goldman Sachs technology symposium, Apple COO Tim Cook said his company will be cutting more deals in both Europe and Asia to reach its sales target of 10 million iPhones in 2008. See Apple’s COO calms the waters.

For a device that represents about 0.4% of the mobile handset market, the iPhone generates an awful lot of Internet traffic.

How much, you ask?

“Unheard of levels,” according an executive at O2, which on Monday announced plans to deploy a network of bandwidth boosting femtocells across the U.K. to handle the extra load. (see here)

And yesterday at the Mobile World Congress in Barcelona, a Google (GOOG) executive offered a more precise measure. According to Vic Gundotra, head of the company’s mobile operations, Google is seeing 50 times more searches from Apple (AAPL) iPhones than from any other mobile handset.

“We thought it was a mistake and made our engineers check the logs again,” he told the Financial Times.

The FT notes that Google’s findings dovetail with earlier reports. In December, O2 reported that more than 60% of iPhone users use over 25mb/month of data, while only 1.8% of O2’s non-iPhone customers go over that mark.

End-of-year sales figures for Apple’s (AAPL) iPhone in Europe are trickling in, but not in any form that can be definitively pieced together.

That latest news comes from Germany, where the head of Deutsche Telekom’s T-Mobile division said in an online interview Saturday that it had signed on 70,000 customers in the 11 weeks since the device went on sale. (link)

What’s not clear is whether that number represents iPhone sales or iPhone activations — an important distinction in T-Mobile’s case because for 2 of those 11 weeks it was required by court order to sell unlocked iPhones. Despite the stiff 999 euro ($1,460) price tag it set for unlocked iPhones, the company reported at the time that “many sold.” Assuming those buyers activated their iPhones with other carriers, they cannot be counted as T-Mobile customers.

France Telecom’s Orange division, meanwhile, reported in early January that it sold 70,000 iPhones in just four weeks. But Orange did say how many iPhones it had activated — sure to be less than 70,000 because Orange was required by French law to sell unlocked iPhones during the entire period.

O2, the exclusive carrier of the iPhone in the U.K., hasn’t issued any sales figures yet, but the Financial Times, citing unnamed “people familiar with the situation,” claims sales in the first 8 weeks came in at 190,000. (link)

Four weeks, 8 weeks, 11 weeks. Activated, sold. Locked, unlocked. There’s no logical way to sort those number out.

But that hasn’t stopped U.S. analysts. When trying last week to unravel the discrepancy between Apple’s iPhone sales (3.7 million in 2007) and AT&T’s activations (less than 2 million), Bernstein’s Toni Sacconaghi and Piper Jaffray’s Gene Munster both seem to have toted up those numbers, added a fudge factor, and come up with 350,000. (See The case of the missing iPhones.)

Is 350,000 good or bad? It’s hard to tell. O2 said it was “happy” with its sales figures, although they seem to have come in below O2’s initial target of 200,000 units. Similarly, France Telecom said its 70,000 sales were well within its target range of 50,000 to 100,000, although as Wired points out, CEO Didier Lombard told Europe 1 radio he hoped to sell 100,000 iPhones before the end of the year, not 50,000 to 100,000. (link)

Deutsche Telekom, perhaps wisely, doesn’t seem to have issued any public sales target. What Philipp Humm, head of T-Mobile Germany, did say in that online interview yesterday, according to Reuters, is that “the iPhone is by far the most sold multimedia device in T-Mobile’s portfolio.”

That I believe.

Employees at Carphone Warehouse, the U.K.’s largest cellphone retailer and the main distributor of Apple’s (AAPL) iPhone in Britain, have been caught trying to mislead customers about what is and isn’t covered by the purchase agreement, according to the BBC.

Responding to viewer complaints, undercover researchers from BBC One’s Watchdog unit visited five Carphone Warehouse stores. In three out of the five, a salesperson told BBC staffers posing as customers that if they lost their iPhone, they would have to buy both a new phone and a new 18-month contract at a minimum cost of 630 pounds ($1,300 at today’s exchange rate).

That’s not true. Customers who lose an uninsured iPhone have to buy a replacement, but can still use their existing contract. Apparently the salespeople were trying to convince customers to buy coverage they did not need from the store’s own insurance policy.

In a fourth Carphone Warehouse store, BBC One was told that the iPhone insurance policy offered by O2, Apple’s other U.K. partner, provided less coverage than theirs. That was also untrue.

The story is reminiscent of some of the problems that surfaced when Apple partnered with AT&T (T) to sell the iPhone in the U.S. Shortly after the iPhone was introduced — and when the devices were still in stort supply — several AT&T stores reportedly wouldn’t let customers buy an iPhone unless they also bought a bundle of AT&T accessories. See Gizmodo’s report here.

A spokesperson for Carphone Warehouse acknowledged to the BBC that there could be “some element of confusion among an isolated number of sales consultants,” but added that the company did not believe the small number of complaints were a “fair reflection” of the experience of thousands of iPhone customers.

The BBC report points out that Carphone Warehouse was fined 245,000 pounds ($500,000) last year for breaking British rules about selling insurance.