This was a new kind of quality, something consumers had never expected from technology or electronics, which had always reflected their origin in the gnarly world of engineering. Buyers of products from Olympus, Panasonic, IBM, Motorola, Canon, or even Sony waded through instruction manuals that were confounding at best, and often nothing more than a step up from the technical Heathkit directions Steve had encountered as a kid. More often than not, buyers of Apple products had little more to do than open a sleek and solid package, connect their stylish device to an outlet or a Mac, and turn it on.

Buyers of PCs had heard about the quality of Apple computers for years. But now that millions of consumers had played with their iPods and used iTunes software on their PCs, Apple’s reputation for building products that made even Sony’s look stodgy was more universal. It had taken just a couple of years, in fact, for Apple to develop a phenomenal reputation among that younger generation that had ignored its products when the first retail stores opened. By 2006, the Apple emporiums from Tokyo to Johannesburg to the new gleaming cube that opened on Fifth Avenue in the heart of Manhattan were flooded primarily by young buyers. For these new customers, and of course for the Apple faithful of old, the company had an open invitation to enter any new field it liked. They were primed for any new addition to the Apple experience.

Just as significantly, Steve’s skill at figuring out an industry’s soft spot, and maneuvering Apple into a position to solve that problem, finally matched his confidence that he could do so. Steve had always been able to suss out the weak spots in other adjacent industries (just as he had always been able to quickly pinpoint the personal foibles of other people). But now that Apple had pulled off its iTunes coup, Steve knew that the company could successfully enter another industry and alter its business model in a way that would benefit both Apple and the industry’s consumers. Releasing a new phone, he knew, might take that strategy to a whole new level of complexity, affecting the lives of not merely tens or hundreds of millions of individual human beings, but billions of potential buyers. All he had to do was figure out how to work with the telephone carriers.

THE FIRST TIME Steve ever railed on to me about “the stupid carriers” was back in 1997. That’s how long he had been thinking about a phone, even though he swore again and again that he’d never do business with “those bozos.” I once said to him, “Steve, methinks you doth protest too much! You sure seem to be thinking about this a lot.” He didn’t laugh. He just got angrier. “Yeah, I do think a lot about what a crock of shit it is,” he ranted, “that our only choice if we want to get into the phone handset business is to work with one of the goddamn telecom carriers.” When Steve agreed to launch the ROKR, Motorola was the one that dealt primarily with the carriers. The disappointing experience reinforced Steve’s belief that the carriers always stiffed handset makers. Nevertheless, the carriers held the keys to a market he couldn’t ignore. By 2004, worldwide unit sales of cellphone handsets already had topped 500 million units a year, dwarfing unit sales of PCs and iPods and PDAs combined. And they were growing.

There was one way that Apple could have avoided the carriers: by operating a network itself. A new strain of carrier had emerged in the United States called a “mobile virtual network operator” (MVNO). The MVNO model made it possible for an independent company with its own strong brand to have its own eponymous network by leasing wireless capacity wholesale from one of the telecom giants. Sprint once approached Steve about starting an Apple-branded MVNO. But as much as he wanted to avoid the carriers, Steve knew that operating a network was a complex, transaction-intensive business and way outside Apple’s area of expertise. So he swallowed hard, and asked Eddy Cue to start knocking on doors.

Cue and Jobs knew there was one big obstacle to negotiating a successful deal: Steve wanted Apple to have complete control over the handset. Since the phone was also going to be a top-notch iPod, and an Internet client, and a serious computing device, the user experience would be critical to its success. The multi-touch interface on the iPhone would be utterly different from anything consumers had experienced before. Furthermore, if websites were going to display at a big enough size for consumers young and old, the screen would have to take up virtually the entire front surface of the phone. All of this was doable, Steve thought—but only if the carriers kept their hands off his design. Finally, Steve knew the team would go through a few designs before getting it perfect; Apple needed the freedom to experiment without anyone second-guessing its engineers. So any carrier that committed to a deal would have to do so without knowing all of the specifics of what kind of phone Apple would finally deliver.

“We actually knew Verizon better than we knew AT&T,” recalls Cue. (At the time, Cue was dealing with Cingular, a joint venture of Bell South and SBC that bought AT&T Wireless in 2004. In 2006, after SBC acquired AT&T Corp. and Bell South, it changed its name to AT&T.) “We knew Verizon because we had consulted them when we did the deal with Motorola for the ROKR, even though they didn’t end up selling the phone. When we went back to them to talk about our own phone, they were pretty tough. They thought cellular was their playground. Sort of like, ‘You’re gonna play our game by our rules.’ And they were pretty powerful. So when you looked at what we wanted to do, it didn’t match well, because they said, ‘Whaddya mean, you’re gonna control the phone’s UI?’ ”

AT&T’s wireless executives weren’t nearly as tough. They had more customers than Verizon, but their network was derided for its spotty coverage. So when Cue and Jobs came for a visit, the results were different. “When we went to see [AT&T],” says Cue, “we spent four hours with Ralph de la Vega and Glenn Lurie in a room in the Four Seasons. And right off we really liked them. You could tell they were hungrier and wanted to show what they were capable of. So we started a relationship that same day.”

Steve regaled the AT&T folks with the myriad ways the iPhone would send consumption of wireless data bandwidth soaring, painting a vision that made them salivate. For the first time, he explained, consumers would have a device in their hand that could do much of what they could do on their desktop computer. The iPhone’s big touch screen would make unmodified, full-featured Internet websites usable just about anywhere. Consumers would download and share photographs, which are rich with data. They would spend lots of time doing email. They could edit documents or manage information about their sales contacts remotely, right on the phone, by interacting with either built-in applications or over the Internet, with specialized websites that worked regardless of whether the user’s main computer was a PC or a Mac. They would purchase and download music from the iTunes store. They could text easily. And that was all without even mentioning video! Once people started looking at videos and movies online, data usage would skyrocket. Maybe someday they’d make video phone calls. He told them about a site that had just started up in February, something called YouTube, where people uploaded and shared video clips with anyone else online around the world. Maybe that too would turn into something big! This is what AT&T had to look forward to, he explained—being the carrier for all these kinds of new activities. And Steve had learned something else along the way, he told them. He knew that once you made this kind of powerful technology available to the world, it would take off in ways you couldn’t predict, in ways that even he couldn’t predict. Surely those developments, too, would drive usage of the AT&T wireless network.