These days it's practically essential to have a cell phone (mobile phone if you're outside the US). I'm a relative laggard in this area. I didn't get my first cell phone until 1999 with a bare-bones $10/month plan and 25¢/minute. And that was the plan I kept for 9 years, until a month ago when I got an iPhone.
The iPhone is great because it's basically a mobile computer with a phone built in. It enables a number of mobile scenarios that -- now that I'm used to -- would be difficult for me to live without. For example, it does a great job approximating my current location when doing a map search, making it really useful for finding nearby stores, restaurants, gas stations, etc. when I'm out & about. It also shows live traffic data on the map, which is critical when making route decisions.
I've stopped carrying a separate music player; the built-in iPod app works great. I love the phone integration. When I receive a call, the audio pauses; when the call ends, the audio starts again. It has a built-in camera too. The quality is mediocre, but it works well enough, and it's always with me. No need to lug around a point & shoot every day for serendipitous picture taking.
The email, SMS, and web browser are useful too but on the AT&T Edge network, things can be a bit to slow to be of much use. But there are times you really want to look something up, and the ability to do it -- albeit slowly -- is nice.
Finally -- and I cannot emphasize this enough -- the iPhone is easy to use. You are not going to find a phone out there with a better interface than this one. As an interface designer, I'm acutely sensitive to design details, and Apple has once again nailed it with this device.
I have the first generation iPhone, and that's the one I'd recommend. The newer one does have a built-in GPS and can access AT&T's faster 3G network. However, I've heard that the faster network is only rarely available, and using it really burns out the battery. Plus the GPS isn't really necessary., given the great triangulation feature in the maps.
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