It looks like someone finally did it. NetShare had tried but was banned from the App Store. NetShare was not very user friendly but they were the first iPhone tethering application out there.

Yesterday, iPhoneModem, an application for the iPhone that aims at making it really easy to use the iPhone’s Internet connection on your computer, was released in Cydia.

From iPhoneModem.com:

What is iPhoneModem

iPhoneModem is an application for the iPhone that aims at making it really easy to use the iPhone’s Internet connection on your computer. iPhoneModem is available for installation jailbreaked devices using Cydia or Installer package managers.

How does it work

On the Mac, iPhoneModem creates a WiFi network to be able to connect to your iPhone and automatically configures the network settings to use a Socks Proxy. On the iPhone it acts as a “Socks Proxy” effectively sharing the Internet Connection.

Why isn’t it on the AppStore

Because Apple has not yet (since July ’08) responded to our “iPhone Developer Program” application and because it has already shown reluctancy to approve sharing the iPhones Internet connection. The reasons for not allowing sharing or “tethering” on the iPhone are probably related to current AT&T contractual limitations. These limitations are not global, meaning that there are other companies/providers which allow it, and we do not believe that Apple and AT&T will maintain this for much longer simply because it’s clearly bad business.

How to Install

1. Jailbreak the iPhone (if you haven’t already):

2. On the iPhone use “Cydia” or “Installer” to install iPhoneModem – it’s filed on the Networking category. After installing a new App named “Modem” should be available on the iPhone.

If you cannot find it you can add our repository to Cydia. The URL is http://iphonemodem.com/cydia

How to Use it

If you have MacOS 10.5 (Leopard), first download and open iPhoneModem on the Mac, click “Connect” and then open “Modem” on the iPhone. Make sure that on the iPhone you are connected to a WiFi network named “iPhoneModem”, created by the Mac application. That’s it, you can start surfing the web.

If you are using Microsoft Windows, Linux or a previous version of MacOS, you’ll have to manually create an WiFi network between the computer and the iPhone and configure Socks Proxy with the WiFi IP of the iPhone and port 1080.

So far, iPhoneModem only worls for Mac but they say they are working on a Windows version.