iPhone News Updated

George Hotz remembers taking apart his first computer, an Apple II, when he was 4 or 5 years old.

He cracked open an answering machine, remote control, vacuum cleaner and more computers. He scavenged for more products to tinker with on trash night in his neighborhood.

Now the 17-year-old from Glen Rock, N.J., has reached the big leagues of hacking. He says he has "unlocked" the iPhone, finding a way to get around the device's restrictions and allow it to be used not only on AT&T's cell phone network but also on T-Mobile's network and overseas.

"I'm talking to you on it right now," Hotz said during an interview with The Chronicle on Friday as he traveled from an appearance on CNBC to an interview with Fox.

The feat comes two months after the highly publicized debut of the iPhone. Combining a digital media player, a camera, the Internet and a cell phone in one gadget, the iPhone represents Apple Inc.'s first foray into the mobile phone business. One of the most anticipated gadgets of the year, it's expected to transform the industry much as the iPod and iTunes helped change the digital media market. The Cupertino technology company said it plans to sell 1 million iPhones by the end of September.

Until now, however, the iPhone has come with a catch. Because of a revenue-sharing agreement between Apple and AT&T, the iPhone operates only on AT&T's network and requires a two-year subscription.

Hackers have spent the better part of the summer tackling that challenge. Hotz said it took him nearly 500 hours - about eight hours a day - to figure out how to make calls on his iPhone through T-Mobile. "It wasn't to be rich," Hotz said. "I wanted to use it with T-Mobile."

Holz published step-by-step directions on his blog at iphonejtag.blogspot.com. Another group, known as iPhoneSimFree.com, said on its site that it also had found a way to get around Apple's locks and connect to T-Mobile. It offered proof to Engadget, a popular technology blog, which published a video demonstration, and said it plans to sell the software. In general, scores of hackers have been working on a way to make the iPhone compatible with other services since the phone debuted.

AT&T and Apple officials declined to comment. But it's highly doubtful Apple will let the hacking continue.

"Hackers are going to have to stay one step ahead," said Raven Zachary, an analyst with the 451 Group research firm and the co-founder of the iPhone Developers Camp, which brought software developers together last month to brainstorm programs for the iPhone. "Each time Apple hardens the operating system to minimize unlocking, it's going to get more difficult for the hacker community to find a workaround to unlock the iPhone."

Since Apple and AT&T began selling the iPhone on June 29, hard-core fans have made Herculean attempts to the bend the iPhone to their will.

For security reasons, Apple allows developers to design programs for the iPhone only through the Web and not directly to the phone. That hasn't stopped programmers from trying. One group, for instance, created a way to video conference on the iPhone, said Damien Stolarz, co-author of the forthcoming book "iPhone Hacks."

Hotz, who is driving with his parents to the Rochester Institute of Technology today to start his college career, had planned to spend the summer replacing the clutch on his green Mitsubishi and building a hot air balloon with his friends.

The car remains in pieces in the backyard. And though he bought some fabric, he abandoned the hot air balloon project to focus on the iPhone. Staying up by drinking vast amounts of Red Bull, Mountain Dew and other drinks, he purposely destroyed one iPhone to figure out how the pieces operated. Keeping one iPhone, he is selling another unlocked iPhone on eBay.

His parents occasionally worried he was spending so much time on the iPhone.

"We're proud of him. He worked all summer on it, so we're glad it was fruitful," said Hotz's father, also named George Hotz and a high school technology coordinator. "There are worse things teenage kids could be doing."