Once again, hackers are a step ahead of Apple and AT&T. Users of unlocked iPhones that are running firmware 1.1.1 or 1.1.2 can upgrade to 1.1.3 over the air directly through the installer.app. Maybe hacker ingenuity is why one-quarter of all iPhone users are unlocking their devices.This latest hack is for previously jailbroken iPhones or iPod Touches. Since iPhones/iPods that are already jailbroken have the installer.app on them, they can take advantage of this hack to update to a jailbroken version of 1.1.3. A warning, though, as not all third-party apps are supported in 1.1.3 yet. Some may be rendered non-functional. You can read a complete how-to here. The one negative about this update is that it requires Wi-Fi, and even then takes up to 45 minutes.

Apple and AT&T don't offer over-the-air updates for the iPhone. You have to plug the iPhone into your PC, download the application from the Internet, install it via USB cable and then re-verify your device every time you upgrade the firmware. One reason over-the-air updates are not offered from AT&T is likely because it doesn't want users downloading 100-Megabyte-plus firmware software over its EDGE network. I don't blame them for that.

Paired with yesterday's revelation that about 25% of all iPhones are being used unlocked, there's a lot to read between the lines. People like the iPhone. A lot. It is a powerful phone, but the shackles it wears from both Apple and AT&T are too much. So unappealing are the chains that one in four users has unlocked the iPhone to use on other networks and install unapproved third-party applications. Says Reuters, the higher number [of unlocked iPhones] is worrying for Apple because the company receives a cut of AT&T's iPhone service fees, revenue that carries a high gross margin and has fueled optimism over its earnings potential.

I say don't cry for Apple. It still makes a profit on each iPhone sold. While it may lose out on some revenue-sharing profits, it is still making sales. On top of that, the long-awaited SDK will be released at the end of next month. If legitimate apps are created that duplicate what hackers are already doing, it may stem the tide of iPhone unlockers. How Apple plans to manage, distribute, and sell the SDK-developed applications has not been fully revealed. But if it is as simple as downloading them from iTunes, the full potential of Apple's model will be realized.