Software Problems Bug Apple's Launch of New iPhone

A customer in the queue looks at a new Apple iPhone 3G being put on sale for the first time at Apple retail store in Regent Street, London, Friday, July 11, 2008. (Image credit: AP Photo/Sang Tan)

NEW YORK (AP) — Apple Inc.'s new iPhone went on sale Friday to eager buyers worldwide, but there were problems getting the phones to work.

Kenny Pichardo, 24, was the first to buy an iPhone 3G at an AT&T store in the New York borough of Queens, but he said it took the store half an hour to get the phone working.

That boded badly for the approximately 70 people after him in line. Pichardo had camped out overnight to be first.

A spokesman for AT&T Inc., the exclusive carrier for the iPhone in the U.S., 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 are telling buyers to go home and perform the last step by connecting their phones to their own computers, spokesman Michael Coe said.

When the first iPhone went on sale a year ago, customers performed the whole 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 planned to activate all phones in-store.

Enthusiasm was high for the new model ahead of the 8 a.m. launch in the U.S. At the flagship Apple store on Manhattan's Fifth Avenue, a line of hundreds encircled the block. Many of them were already owners of the first iPhone, suggesting that Apple is preaching to the choir with the new model, which updates the one launched a year ago by speeding up Internet access and adding a navigation chip.

Thanks to subsidies by the carrier, the price has also been cut substantially to $199 for the cheapest model in the United States.

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.

Outside an AT&T store in Atlanta, more than 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."

The new phone went on sale Friday in 22 countries. In most of them it was the first time any iPhone was officially sold there, though several countries have seen a brisk grey-market trade in phones imported from the U.S.

On the Japanese market, the iPhone's capabilities are less revolutionary, 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. By Friday morning, the line at the Softbank Corp. store in Tokyo had grown to more than 1,000 people, and the phone quickly sold out.

"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."

The phone went on sale first in New Zealand, where hundreds of people lined up outside stores in New Zealand's main cities to snap it up right at midnight — 8 a.m. Thursday in New York.

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."

In Germany, T-Mobile stores reported brisk sales, particularly in Munich, Hamburg and Cologne, said spokeswoman Marion Kessing.

AP Business Writers George Frey in Frankfurt, Germany, Yuri Kageyama in Tokyo and Greg Bluestein in Atlanta contributed to this report.