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Ever since the release of the iPhone this summer, it's been a battle of wills between Apple (Nasdaq: AAPL) and hackers to see who would ultimately win control of the much-coveted device. This week the hackers scored another point by devising a way to roll back the clock, in a limited way, to before their phones were disabled by Apple's most recent upgrade.
Apple released its firmware upgrade, version 1.1.1, last week. The upgrade effectively rendered hacked iPhones useless -- thus coining the term "bricking" for its end result. A workaround posted Monday on the iPhone Dev Wiki, however, allows users to restore some functionality to their devices, though not phone service.
Phone functionality rests with the iPhone's baseband chip, but hackers have yet to find a way to roll back the firmware used by that portion of the device. "So far all attempts to downgrade the baseband have been unsuccessful," the iPhone Dev Wiki reported. "There have been several reports of successful baseband downgrades online, but these haven't been confirmed."
Born to Be Hacked
Apple's iPhone is tied exclusively to AT&T's (NYSE: T) cellular network in the United States, a limitation that has raised ire and been viewed as a challenge by hackers around the globe. The first hack was achieved with a soldering iron through a hardware approach by 17-year-old George Hotz in August. Shortly thereafter, a raft of software approaches, which are much easier to complete, were announced.
Some U.S. users have been using their hacked iPhones with T-Mobile's network, which is technically compatible with the device. Others have hacked the phones simply to use them in areas without official iPhone service. The legality of the hacks has yet to be determined, but Apple responded with the version 1.1.1 upgrade last week that rendered the unlocked devices as useful as bricks.
According to Apple's warranty, "Making unauthorized modifications to the software on your iPhone violates the iPhone software license agreement, and the inability to use your iPhone due to unauthorized software modifications is not covered under your iPhone's warranty."
Translation: From Apple's perspective, the hackers are out of luck.
A New Challenge
Not surprisingly, last week's upgrade posed a new challenge to hackers, who struggled to restore hacked devices following the bricking process.
"I think it's more of a technological adventure than any real practical use," Bill Hughes, principal analyst with In-Stat, told MacNewsWorld. "I don't understand what benefit there is, other than the technical thrill and bragging rights."
Given that the iPhones are not subsidized by AT&T, "I don't think carriers are in a position to care what devices their customers are using," Hughes added. For Apple's part, "I don't know why they would care, other than stubbornness."
Adding Encryption
One of the principal reasons the upgrade has been so difficult to undo is because Apple is now using encrypted firmware, where before it wasn't, Andrew Storms, director of security operations for nCircle, told MacNewsWorld.
"It used to be that hackers could grab the firmware and use reverse engineering tools to get the information they needed," he explained. "Now they have an extra hurdle. First they have to get the decryption working; then they can start reverse engineering."
The public nature of all the early hacking successes was undoubtedly a factor behind Apple's new, tougher approach, Storms added. "You can bet that Apple would have read all the public statements -- those gave them the road map for how to block these efforts," he noted. "Those daily blogs showed them how to put in stumbling blocks to stop them."
Keeping Control
From a strategic perspective, though, Apple's strategy 
was necessary to keep control over the iPhone, Storms added. "Their bread and butter for the iPhone is keeping control of what devices run natively on it."
"You can bet they have some kind of revenue-sharing agreements or contracts with YouTube as well as AT&T," Storms said. "Apple needed to do something to keep those partner relationships feasible going forward."
Eventually, there is bound to be some sort of compromise, Storms predicted, whereby Apple will release a development kit for the iPhone -- along with a strict licensing agreement.
"That would permit the larger vendors who can afford the licensing to develop ad hoc products for the iPhone," he said.
In the meantime, however, Apple's image is changing. "Historically Apple has been the breaking-the-mold, inspirational, creative zealot of the industry, going all the way back to the famous 1984 'Big Brother' commercial," Storms said. "Now they have kind of changed roles -- it's part of getting big, and also it's part of being in the cellular market for the first time. I'm not sure they know what to do."
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