This Friday, iPhone software developer Jay Freeman plans to open a service called Cydia Store, which will sell applications rejected by the App Store, including his own Cycorder, a free app that turns an iPhone into a camcorder. According to the Wall Street Journal, he's not alone in this endeavor: another store called Rock Your Phone is in the works, while a third company wants to sell adult games for the popular handset.

Apple has rejected many submissions to the App Store, either because they violate AT&T's terms of service or because the content is deemed offensive. While some iPhone owners endeavored to "jailbreak" their devices during the first year of the device's existence, the opening of the App Store last year dampened that activity. Mr. Freeman's Cydia Store, however, requires that users first install a piece of software that behaves in a manner similar to a jailbreak tool.

Mr. Freeman plans to offer developers the same terms as Apple asks: a 30% commission on sales. Apple, of course, did not respond to the Wall Street Journal's request for comment (the company rarely makes public statements), but Mr. Freeman has a lawyer on standby and argued: "The overworking goal is to provide choice. It's understandable that [Apple] wants to control things, but it has been very limiting for developers and users."

Apple has made the case in the past that any attempt to modify an iPhone is a breach of the Digital Millennium Copyright Act (DMCA), but University of California Berkeley School of Law professor Aaron Perzanowski told the Wall Street Journal that he thinks developers have "a pretty good defense" under the DMCA.

While the Wall Street Journal raised the concern that alternative app stores, if successful, could harm Apple's App Store revenue, Needham and Company analyst Charlie Wolf issued a report saying such fears are unfounded. According to AppleInsider, Mr. Wolf argued: "First, the rogue stores will be limited to selling applications the iTunes App Store won't sell, largely offensive apps, not any of the 25,000 the Store has approved and is selling. So the App Store should experience no loss of revenues from the sale of rejected applications by competing stores. 

"Second, as the story notes but fails to emphasize, the only purpose of the iTunes App Store is to lock iPhone owners to the iPhone and hopefully sell more iPhones to application-centric customers. As such, Apple manages the App Store as a breakeven operation … Third-party application stores could actually benefit Apple to the extent that they attract and lock in additional customers to the iPhone."