I originally thought there wasn't a good reason to upgrade to the iPhone 3G from the original iPhone, and these were the main concerns I had with the first one:
Recessed headphone jack
Slow internet browsing via their EDGE network
Lack of "cut and paste" option
Notes app
Spotty coverage
Short battery life
I have a pair of Sony headphones that I like and use on my iPods. However, the first iPhone's recessed headphone jack prevented me from using my favorite headphones, which had an angular plug. Last month I found an adapter that would allow me to use my Sony headphones, but I passed because the default headphones had a mic and I could use them to record on my iPod Nano 4G.
I mainly use my iPhone for business e-mails and phone conversations, and web surfing was something I only did when I was stuck somewhere without any options (i.e. iPod, book/magazine, XM radio, etc.). Although I like the browser scaling, I still prefer to browse on something with a larger screen. The only times I browse now are for those stuck moments, and finding sites to look at later ...
... which leads leads me to the lack of a "cut and paste" option. I can't see how anyone can really finish some things without having one of the most basic computer features. If I could "cut and paste" links from the browser to the Notes app (I just remember another concern) then that would save me time, paper, or using other handheld devices like my iPaq.
The iPhone Notes app, which is also featured on the first iPhone, has a nice Lotus-y feel to it. However, it doesn't sync with the Mac Mail feature that bears the same name. If the developers are lazy then rename either the iPhone app or the Mail feature, or, if they're interested in a quality, get it to sync with computers and MobileMe.
AT&T, out of the big 3, has the worst coverage. I commute daily up and down interstate 95, and I consistently lose my signal. Is it wrong to assume that cell carriers should cover major interstates that carry the bulk of U.S. traffic, from supplies to family visits? There's only 1 hit-or-miss spot with my personal Sprint phone, and that's on the bridge that crosses the Rappahannock River. I'll be switching to Verizon, who has the best coverage out of the big 3, as soon as the Blackberry Bold becomes available to them.
I had to recharge my first iPhone twice a day. Prior to the 2.1 firmware update, my daily routine consisted of recharging the phone as soon as I got up, and recharging it after I got home. The timing of the firmware update was impeccable because I was about to give my first iPhone up pretty quick. I'm still trying to get a feel for the iPhone 3G's battery life because it sucked for the first 2 days I had it, but I woke up with a full bar this morning.
To sum everything up: 1. the 3G headphones use the same connector that the first iPhone uses, and I'm content with using it, 2. I still don't surf the Internet like I thought I would, and retrieving e-mail seems the same, 3. still no "cut and paste" feature, 4. iPhone Notes is still a stand-alone application, 5. I still lose a signal while commuting, and 6. neither phone has the battery issue when I purchased my first generation iPhone. I do like the GPS feature, which I'm still playing with, but it's not a Garmin or Tom Tom - the first gen iPhone Google Maps app worked just fine. Money-wise, the 3G wasn't worth the upgrade. Nerd-wise, I'm having fun playing with the GPS feature.
One more thing, and I'm going to sound like a fanboi for a moment ... the iPhone is definitely the direction phones need to go in. I think people want a compact phone that's simple to use, but has a enough capability to do what they quickly need. I don't like having a behemoth that's going to give me shoulder issues down the road, or something that requires me to use a toothpick to use it. The iPhone is small enough to fit in my pocket, and it allows me to keep in touch with people on a larger scale, which sucks on a small phone with a tiny screen and using SMS. I've mentioned this to other people, a Windows Mobile phone definitely has more features, but the iPhone package seems more polished. At the moment it has nowhere to go but up, and that price cut definitely helped.
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