Steven Levy has a short interview with Steve Jobs on iPhone. Obviously, iPhone is a huge accomplishment. Jobs tell Levy that "If we didn’t do one more thing, we’d be set for five years!" And that's probably true. Apple has completely changed the game for phones. The biggest accomplishment is to put an enterprise class OS like Mac OS X in the palm of your hand in a tiny phone. What this phone will be able to do, both out of the box and down the road, will overshadow every other phone that can be made because it is so much more powerful. Sure, Motorola and Nokia have smartphone platforms and there are Linux phones, but its hardly the same thing. None of those guys have the engineering skills or frankly the standards to do something like this. Apple says it wants 1% market share in the phone market or 10M units. That's $5.5B in mostly incremental revenue or a 25% increase in revenue. Jobs made the point that mobile phones are the highest volume segment of the CE business and its the point that he should make, because Apple essentially launched a new multi-billion dollar company this week. That's why their stock went through the roof, from $85.70 on Monday to a peak of $97.71 on Tuesday.

But here's the thing - I'm not sure I'm going to buy one. The iPhone is probably as remarkable for what its not as for what it is. First off, Jobs repeatedly slammed the "plastic" keyboards of regular smartphones. Jobs is just totally smoking his own crack here. There is no way that a screen-based keyboard is going to be as good as a physical one. It doesn't give tactile feedback and you can't use muscle memory. David Pogue confirms it in his review of the iPhone. Here's his take:

Typing is difficult. The letter keys are just pictures on the glass screen, so of course there’s no tactile feedback. Software helps a lot. You can afford to make a lot of typos as you muddle through a word, because the software analyzes which keys you *might* have meant and figures out the word you wanted. Its best guess appears just under what you’ve typed; if it’s correct, you tap the Space bar to accept it and continue. I typed a couple of e-mail messages with lots of typos but eventually 100 percent accuracy, thanks to this auto-correct feature. (My testing didn’t involve proper names, however.) Bottom line: Heavy BlackBerry addicts may not want to jump ship just yet.

That means me. iPhone would be nearly perfect as a slider with a real keyboard. I buy the whole "changeable" interface thing. Great idea. And that will work for everything but text. Jobs is smart enough to know that. But his minimalist instincts and his desire take make it thin led him to dump the screen. Guy Kawasaki once said that Steve had a blind spot on every product. On the original Mac, it was the lack of a hard drive, on NeXT it was the optical drive, and on iPhone, its the touch screen keyboard. For someone like myself who for whom e-mail is a necessity, iPhone just won't cut it.

The second thing holding me back from iPhone is the capacity. A lousy 8GB at the max? I have 12GB of music and another 10GB of TV shows. I don't want to do all that "make a playlist to sync" business. I want it all on my iPod, all the time. I have the 80GB iPod and I like it that way.

Still, this may prove to be Job's greatest genius. He's segmenting iPod further and making it ubiquitous. The biggest customer segment for iPod Shuffle is not people who want a cheap iPod, but people who already have a bigger iPod and want something smaller for jogging. So now Apple will get you three times. Once for your big daddy player, once for jogging, and once for your phone.

The third issue - Cingular and EDGE. Jobs pimped Cingular like they were the Apple of networks. That's hardly the case. I use Cingular. Its gotten better in the last year, but it is still flaky, drops calls, and has dubious audio quality half the time. But worse, Cingular doesn't have a nationally deployed 3G network. Its only 2.5G for the most part. So the phone of the future has the speed of a modem. Apple was smart to integrate Wi-Fi for this reason. Because if it was EDGE only, it would be too expensive and too slow to use most of the features on iPhone. A lot of places I go have Wi-Fi access, so that would work okay. Pogue says the web is slow on the device, and the demo looked that way, but I think Apple will tune this up a lot before it ships.

Then there's all the no brainer stuff that isn't there, and Levy talks about it in his article. First of all, what's up with no iChat??? Well, its obvious. Cingular wants their pound of flesh for SMS. People would use SMS anyway, so I don't know why Cingular is so threatened, but not having iChat is a real miss and Apple should be ashamed of itself for whimping out on this one. Next, you can't use your iTunes songs as ringtones. Levy has Jobs insuates its all about money. That's probably the case. The labels make a lot of money on ringtones and they see it as different from songs. They want extra money for it. Jobs has got to sort this one out. The world's best music phone can't lack musical ringtones and ringback tones.

So I just don't know. My brain says I don't need iPhone and I'm better off to wait for a high capacity, wide screen iPod. But my heart wants one, even though I don't need it and it doesn't do what I need.