The Apple iPhone may spark a new round of conflict over who will define the future of the handset and control the customer experience.

Apple's combination cell phone, iPod and Web browser, released to widespread hype June 29, is ex- pected to spawn an army of clones that emulate its use of a relatively large touchscreen display and graphics-based user interface. That could fuel the long-fought battle between carriers and OEMs to define the handset's look and feel. "Everyone wants to have their own experience dominate the phone," said a senior executive in the cell phone industry who asked not to be identified.

Many carriers maintain extensive programs to dictate which devices can and cannot be linked to their wireless networks. "I have been on the receiving end of carrier handset requirements, and they are gargantuan, almost inconceivably large," said the industry source.

Some are trying to fight carrier control through the legal system. The Skype division of online auction house eBay petitioned the Federal Communications Commission earlier this year to force carriers to open their networks to all devices and applications. Thus far, the FCC has taken no action on the petition.

"We can't build the products we want to build, charge for them what we want and add the services we want. It's just a really broken system," Jeff Hawkins, founder of Palm and lead developer of the Palm Pilot PDA and Treo smart phone, said in an interview at the time of the FCC filing.

Carriers want to build their own agendas into cell phone designs, but they want the most compelling handsets to be available on their networks, not on competing nets. That was the likely motive behind AT&T's partnership with Apple, said Andrew M. Seybold, founder and principal of consulting firm Andrew Seybold Inc.

"AT&T, in my opinion, made the deal because they are interested, as are all wireless networks, in gaining more customers at the expense of their competitors," said Seybold. "If the iPhone is successful, they stand to gain several million new customers who switch to AT&T simply because the iPhone is the 'in' phone."

Industry sources believe AT&T wasn't Apple's first choice when it started pitching its iPhone. "Apple went to Verizon Wireless with the iPhone proposal first. Verizon looked at the terms and conditions and decided not to move forward," said Seybold. Apple then went to AT&T.

Seybold thinks Apple got the better end of the deal with the carrier. For one thing, AT&T's brand does not appear on the phone, although many other phones on its network do bear its logo. Apple also controls activation of the phone through its iTunes service.

AT&T likely made exceptions for Apple when it came to following the carrier's written handset requirements, which include support for specific Java class libraries, among other mandates. "I haven't seen the AT&T handset requirements in about nine months, but the iPhone probably doesn't sit very well with them," said the industry source.

"Even the ads for the iPhone barely mention AT&T, [and] AT&T cannot sell them in its indirect channel stores--which account for a large portion of its business--and Apple controls the distribution," Seybold said. "I believe AT&T gave Apple way too much control over the distribution of the product as well as the applications that can be run on it."

On the upside for the carrier, AT&T will gain new customers, who have to commit to a two-year contract for the iPhone. The cost of customer acquisition is lower with the iPhone than the norm, Seybold said.

Usually, a new customer costs $350 per subscription, including phone "buy down" (subsidized by an operator) and sign-up for a $50-per-month plan. Seybold estimated that it takes network operators seven months just to recoup the initial costs.