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"Who was going to buy an iPhone when virtually all websites were unusable? (remember at that time there were no apps). And who would rewrite their website to support an iPhone that nobody was buying? "

Which of course was why MobileSafari and it's "pinch-to-zoom" functionality was revolutionary - it solved the chicken-and-egg problem by not requiring a site to be rewritten (although as experience has since demonstrated, you can certainly improve the user experience by optimising for mobile devices).