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Jun. 20, 2009

Apples's shiny new 3G S iPhone went on sale yesterday morning, but this time with smaller waiting lines and less fanfare than when the original iPhone came out last July.

About 240 people were in line just before the 7 AM opening of Apple's flagship store on Manhattan's Fifth Avenue, just a fraction of the people who lined up around the block for last year's launch.

Last year's launch turned into a real mess as Apple's servers failed to cope with the huge load of new customers trying to activate their new iPhones.

Making matters worse, people who already had their iPhones were trying to install a new software update on the very same day, adding to the pressure.

For this year's new launch, Apple and AT&T, the phone's exclusive U.S. carrier, defused the drama by taking pre-orders for the new phone online. The pre-orders actually started June 1st.

That means fewer prospective buyers had a reason to stand in line, and it sped up the activation process quite a bit in fact.

Apple also released its new software update for previous customers two days early. There were only just a few reports of problems with that software upgrade.

Apple's new iPhone model is called the 3G S. AT&T said it had taken pre-orders for hundreds of thousands of the phones. Apple sold one million units of the older model, the 3G, in the first three days in July 2008.

Owners of the previous model, the iPhone 3G, will have to pay more than that. Most of them are not eligible for the new-customer pricing because the AT&T subsidizes the cost of the phone and requires customers to "pay off" the subsidy through their monthly service fees before it will subsidize a new phone.

In line at the Fifth Avenue store, Brandon Dennie, 27, was not put off by the prospect of having to pay the unsubsidized price of $599 for the new phone. He's had a 3G for only six months, so he didn't qualify for the lowest price.

For new customers signing a two-year contract with AT&T, the 3G S costs $199 or $299, depending on the memory capacity that you select. Compared to the 3G, it has a faster processor and an upgraded camera.

He's creating his own subsidy by selling his old phone for $200 to a colleague, and he has an Apple gift card. "I want the video option and the speed," Dennie said.

In its young life, the iPhone range has revolutionized phone design and given AT&T a leg up on its wireless rivals in recruiting customers fast and that are willing to pay high monthly fees.

At an AT&T store in the New York borough of Queens, there were three people in line at 5:45 AM. Sarah Gates and Ed Phyfe, the couple who were first in line, didn't know about the pre-order option until it was too late, and wanted to be sure to get phones from the small stock set aside for walk-ins.

"We got Sprint smart phones since just before the first iPhone came out, and we immediately regretted it," said Gates, 33. She has nothing against Sprint Nextel, but the Motorola Q phones were awful, she said.

Apart from the U.S., the new iPhone also went on sale Friday in Canada, France, Germany, Italy, Spain, Switzerland and the U.K.

Other countries are expected to get it throughout the summer.

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    This article was featured on Business 5.0 and on Tech Blog.

Source: AT&T.