What they gave up was control over the phone. Before Apple the carriers always had the final say as to the phone look, feel, branding, and applications. With the iPhone that all changed. The carrier name wasn't even on the phone, which was completely unheard of in the mobile space. They didn't have a carrier splash screen. Plus Apple could push updates whenever, assuming that the carriers gave it the OK.
All true, but all making it easier for Cingular, not harder. I think that's why, when Jobs claimed to have gotten around the carrier, Cingular rebutted him:
The comments from Jobs triggered a surprisingly sharp rebuttal from Cingular national distribution president Glenn Lurie, who flatly denied that any concessions were made and implied that Jobs' assertions were little more than posturing. "I'm not sure we gave anything," Lurie stated. "I think they bent a lot."
That's what Apple learned from the ****ed-up ROKR experience: carriers suck.
The whole thing where Jobs bragged about being against carriers was hypocritical in the end. He decried the fact that you were supposed to buy apps and music from the carrier walled gardens, and then turned right around and created an even higher walled garden where Apple got all the money instead.
As for the ROKR, carriers had nothing to do with it. Apple's meddling was a big reason it failed. Jobs was so afraid that smartphones would kill the iPod, that he forced a hundred song limit on the poor thing.
I think the real lesson Apple learned from the ROKR, was to do the UI themselves.
Is there a reason none of these photos show the actual unit, just the screen from a dark room? Why would you not photograph that for people who give less of damn about the software and are more curious about the hardware?
In this case, the software was obviously what was being demoed. The hardware, at least with phone capability, would likely not even exist in a form yet that would fit into the desired case. So you work with prototype systems instead.
The same thing happened during actual iPhone development. For secrecy purposes, most software developers never got to see the target device, but only interacted with a circuit box and touchscreen. Likewise, the hardware engineers were given a bogus UI to test with.
Such Apple developer segregation for secrecy is one reason why I grimace every time someone talks about Apple having highly integrated hardware and software. That's pretty hard to do when almost nobody from each side gets to see the entire device working as a whole.