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D'OH: "Cheaper" iPhone 3G is Actually $40 MORE than Original Model

Noah Kravitz
Posted on Monday, June 09, 2008
by Noah Kravitz, Senior Editor, Consumer Products and Services
Lost in all of the excitement about the newer, cheaper iPhone 3G is this little nugget: AT&T is raising the cost of iPhone data plans from $20/month to $30/month for consumers (the plan price stays at $45/month for business users).  Considering that you have to sign a two-year contract for voice and data to get iPhone 3G for $199 (8 GB) or $299 (16 GB), that new "lower" priced iPhone 3G will actually cost you more in the long run than the current "more expensive" iPhone (EDGE version).  Here's how:

Note that this is all based on what I know now - which doesn't include info on included/add-on messaging plans for iPhone, which could sink this entire theory (though I doubt that'll happen).

You're paying $10/month extra ($30 vs 20) for the mandatory new data plan over a minimum of 24 months.  That's $240 extra over the life of the contract (more if you keep your service beyond the two-year minimum).

Apple, on the other hand, is dropping the price of the phone itself $200 - from $399 to $199 for the 8GB model and $499 to $299 for the 16 gig version.  Last time I checked, $240 was still more than $200.  So your net cost of phone plus two years of service will be $40 more than on the original iPhone, despite Apple's catchy new "Twice as fast.  Half the price." tag line.  Actually, it'll be a little more than $40 with taxes and fees and all.

Of course you'll be getting 3G data access, which I'm sure most buyers will think totally worth the extra $40 versus the current model's slower EDGE data.  But, hey, I'm not forming opinions here - just pointing out the facts lest they be lost in the marketing machine.

It remains to be seen if buyers will still be able to purchase an iPhone at the $199/299 price point and walk out of the store without activating it, or if the retail price will be higher and a rebate will be given upon signing a service agreement.

Our fancy algorithm says this stuff is related...

Noah Kravitz
Tuesday, June 17, 2008@Daniel M: Yes, instinct has a soft touch/grippy plastic back. Service-wise, I think a lot depends on coverage where you'll use the phone. For me, Sprint happens to work better in my house than AT&T does, but at my office they're both good. Theoretically, Sprint's EV-DO Rev A network will offer faster download speeds than AT&T's HSDPA network, as well. But your actual results may well vary according to where you are, how much network traffic there is, etc etc.
Omair Chughtai
Friday, June 13, 2008Wait.... So is it $40 dollars a month or a one time fee of $40?
RANDY Davis
Tuesday, June 10, 2008Iphone is great but why go thru horrible ATT and paid 70plus a month with bad coverage when Instinct is coming out
Ed H
Tuesday, June 10, 2008@Peter, i think what you really meant is that extra $200 in your pocket now is worth more than the $240 over 2 years.
counsel dew
Tuesday, June 10, 2008Sprint? Service? Those two do not, in my experience, go together. I, personally, have had a nice experience with AT&T and Apple. Re: price of the service, you would need to say AT&T seems to charge iPhone users more than RIM users, if that would be accurate. In comparing different products (phone or provider), please try to keep the other variable (provider or phone) the same. Better comparisons result.
Daniel M
Tuesday, June 10, 2008Noah...does the samsung instinct have a soft touch back to it and how does sprint service's compare to at&t(had both before no big complaints for either one)? Im on the fence on whether I should go for the instinct or the new iphone 2.0. Im leaning towards the instinct
Daniel M
Tuesday, June 10, 2008Noah...does the samsung instinct have a soft touch back to it and how does sprint service's compare to at&t(had both before no big complaints for either one)? Im on the fence on whether I should go for the instinct or the new iphone 2.0. Im leaning towards the instinct
Derek Brackett
Monday, June 09, 2008Noah.. i have a question for you. If one person on your verizon family plan has had an upgrade and the others have not does that mean that everyone is stuck with verizon for another 2 years? And i was also wondering if you would reccomend verizon or at&t?
Iphone User
Monday, June 09, 2008This is the most idiotic comparison. You do know that the device and service are two separate things right? The phone is cheaper but you're getting a faster speed so of course the price is going to go up. You can't upgrade from dial-up to cable and expect to pay the same. The equipment is cheaper and that's the bottom line.
Marcos Nunez
Monday, June 09, 2008Even thought it's more expensive I am going to get it. I am switching from Verizon to ATT. I know Verizon might be better with coverage but I really want an iPhone and the CEO of Verizon is stupid for saying no to Apple's iPhone.
Noah Kravitz
Monday, June 09, 2008@Nestor: Yes, thanks. Corrected.
Nestor H
Monday, June 09, 2008"$499 to $399 for the 16 gig version" I think you mean $299 for the 16 gig.
Rodizell Spizell
Monday, June 09, 2008It’s so stupid that Apple is dealing directly with the horrible AT&T bull crap service and not Sprint, that’s why I’ll be buying the Instinct the true 3G phone with a great coverage area.
Peter J
Monday, June 09, 2008If you consider the time value of money, that extra $200 in your pocket now is worth more than $40 over 2 years.

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