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3G iPhone - Twice as Fast and NOT Half the Price

Posted by Chris Leckness on 06/10/08 in At&t, iPhone

At least not 1/2 the cost of ownership. Apple is marketing the 3G iPhone as twice as fast and half the price, but that is only true to an extent. Yes, the dough you shell out to Apple will be 1/2 the price, but the dough you throw to AT&T is more than the 1st Gen iPhone. Apple isn’t lying really, but it’s a tad misleading. So, now AT&T is getting paid handsomely for their voice and data for you to use the 3G iPhone, as they should, it’s their service. They should be making the dough, not Apple.

Anyhow, some colleagues are discussing the cost of ownership of the 3G iPhone and it’s not as pretty of a picture as Jobs is trying to paint. Don’t get me wrong, it’s probably a great phone and well worth the cost, but the cost of ownership is going to be more than “1/2 the Price”. I am not sure what cut Apple will get per unit from AT&T for the hardware, but I am sure they are still profiting nicely.

The cost of ownership isn’t a HUGE jump, but let’s take a look at it like my colleagues have…

Gen 1 iPhone
$500 (16 GB iPhone, original)
+ $480 ($20 x 24 months data service)
—————————————————–
= $980 (total cost of ownership)

Gen 2 iPhone  (3G iPhone)
$300 (16 GB iPhone 3G)
+ $720 ($30 x 24 months data service)
—————————————————–
= $1020 (total)

$1020 - $980 = $40 more expensive for the 3G version.

Now, according to reports and leaked internal documents, text messaging will not be included in the $30 data package as it is now in the $20 package. So, lets tack on another $10/mo or so. That makes the total cost of ownership $140 more than the original iPhone. Ok, one more variable… You have the original iPhone on contract with AT&T right now. You just started a 2 year hitch last summer, how are they going to handle a 1 year early termination to start you on a new 2 year plan?

As I said, this is not here to tear down the 3G iPhone, just as a “watch out” to consumers, it’s not a “cheap” as it appears. I am proud to see that AT&T seems to have gotten their clutches on some profit from this. I was amazed to see how they let Apple have their way with them last year.

Have a Read at Matt Miller’s Concerns along the same lines as well….

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Written by Chris Leckness · Filed Under At&t, iPhone 
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  • One problem with the new iPhone is that although you end up paying more over the 2 year life of the plan, the AT&T 3G network still is very limited. So depending where you live you may be lucky if you even get one year of the faster service.
    For me it doesn't matter, I prefer an actual keyboard to the touch screen on the iPhone, but there is no denying that the phone is beautiful, and has the best mobile
    browser out there.
  • twestley
    Ouch, people are paying $30/mo for DSL? I pay that for 20Mb/s Verizon FiOS. That's why it's hard for me to justify $30/mo for 3G.
  • twestley
    I'm not up on the latest AT&T data plans. When I switched from Windows Mobile (Cingular 2125) to an iPhone Nov 2007, of all the smartphones (Blackberries, WM, and iPhone), only the EDGE iPhone had a $20/mo unlimited data plan. That's one of the main reasons I switched. I suspect that they're all 3G and all $30/mo and up now. Too much for me. I'll stick with my EDGE iPhone for now.

    (Then later, just as I finally gave in to having a monthly cell phone bill at all, I'll probably give in to the $30/mo data plans!)
  • doogald
    It is $45 if you want push - which I want, and which you get with an iPhone 3G for $30, by the way - and then another $15 if you want to tether, USB or BT.

    And, trust me, it's not high speed everywhere. Not even close. And Verizon's current smartphones are limited to EVDO Rev 0 anyway, so, at best, you are getting those slow DSL speeds anyway. Fine for me, but Verizon data is expensive compared with this iPhone 3G deal.
  • hyedipin
    $45 is not so expensive if they let you tether or use USB receiver. What else do you want? Internet Anywhere, for high speed connection, $45/month.
    So much better than $30/month people are paying for slow DSL connections.
  • doogald
    Verizon charges $45/month for "unlimited" data plans (they are actually capped at 5 GB, but I never come anywhere near that.) They recently reduced that to $30 for a handful of phones, but that does not allow push mail, and tethering adds back another $15.

    I also see that AT&T used to offer $60 as the lowest voice plan for the older iPhone, but you can now get a voice plan for as low as $40/month (though they haven't announced the included minutes for that plan.) So, if you do not use many voice minutes, you may actually save money over 24 months after all.

    But, again, it is hard to comment precisely based on rumors and pre-announcements. It's probably better to wait until things are official.
  • hyedipin
    Well, although I mentioned my opposition on the first reply above, if you think about it, the data plan is not that expensive. I am using Blackberry BIS with AT&T; and it costs $29.99 a month. That is expensive. It doesn't give me 3G, it doesn't give me audio streaming or youtube, I don't have GPS (I could have, but my version doesnt have) and bunch of other cool stuff I could have with WM or iPhone are missing on Blackberry. Then why do people still buy and use blackberry? Because it works, and it is best at what it does. Unlike other phones out there.
  • It'd be interesting to see a TCO done on several of the major providers with their top-selling devices that are comparable to the iPhones, so that aside from the semantics of what Jobs was implying about the 3G version costing less that v1 iPhone, to in fact actually see what it TCO runs relative to everyone else.
  • AWP
    I spend over 2k a year on data and voice with my gen 1 iPhone. I don't think that many people who own one will care that much about TCO being slightly higher.

    After ten windows mobile devices (Professional and smart phone) in the last two years I could only settle for an iPhone for my needs, but everyone’s needs are different.

    I would be buying the 3G iPhone if it cost 1k, it is worth it to me.

    Btw, I’m glad to see your site is back up, I too was part of the H1 outage, we bama boys have to stick together.


  • You have a point there. I am thinking of leaving to go to another carrier, something I've never done. I have been with AT&T; since it was Bellsouth Mobility and through Cingular... I've upgraded my plan numerous times. Currently my bill is over $250.00, so to me, what's another $10/mo right?

    Good points made by all. The key here is that AT&T; is going to get theirs this round and that is a good thing.
  • Bubba
    I'm anything but an Apple/AT&T apologist, but you have to compare apples to Apples...

    Now, according to reports and leaked internal documents, text messaging will not be included in the $30 data package as it is now in the $20 package. So, lets tack on another $10/mo or so. That makes the total cost of ownership $140 more than the original iPhone.

    "reports"? Citation? I find it hard to believe any unlimited data plan will include ZERO SMS messages. We'll have to wait and see, but it's pointless to debate that yet.

    As for even the $10 cost increase? Well, I guess in theory they are not allowing you to pick a slower data plan - but they are increasing the download bitrate from 200kbps to 1mbps+. Does your ISP allow you to upgrade like that for free?

    Ok, one more variable… You have the original iPhone on contract with AT&T right now. You just started a 2 year hitch last summer, how are they going to handle a 1 year early termination to start you on a new 2 year plan?

    You are not terminating anything, you are signing a new contract that replaces the old one. As you said, contract is extended to 2 years again, same as they have been doing for 10+ years of SBC/Cingular/AT&T cellular plans. Show me a provider who charged you an early termination fee for upgrading your plan - do you even OWN a cell phone??
  • doogald
    I agree that copy/cut/paste should be there, but, just for the record, it is also missing from my WM 6.0 Smartphone. But, really, if you need a feature that the iPhone is missing, then you need another phone, period. Why not just get the phone you need and not bother bashing other platforms?

    My phone has a removable battery, but I never remove it. If it were built-in it wouldn't be that big a deal to me.

    As for Touch pricing, that's hard to say. The price of the iPhone is apparently subsidized by 2 year contracts to the carriers, and, obviously, the Touch will not be. I do wonder if they will bring the price down closer, say $50 less, but it may be that the Touch sells well enough at this price point that they do not need to reduce the price. I guess that we'll see.
  • Where is Copy Paste ?
    MAC is so good at promoting, and every one just falls on there tail.
    But Apple/MAC needs to do better.
    Yes the phone is great looking, but what's new, faster internet ?, is the camera much better ? why is there no video call's ? Actually the new things is still OLD.
    Can I change my battery ?
    No Apple, has done this again. People like my self got the first one, and was happy with the internet and mail, but in a business you need copy / Paste, why are they not getting this. There discussion forum, is no good, all you will hear is " the iPhone does not do that" so get the new iPhone 3G and get ready to get disappointed
  • Dennis Kan
    im thinking about getting an ipod touch. do you think they'll lower the price cause the 3g iphone 8gb is only gonna be $200 and the 8gb touch is 300?
  • doogald
    If you own an iPhone, you do not need to worry about early termination to get a 3G - AT&T will just sign you up to a new 2 year contract.

    Another difference is that the original was unsubsidized, but AT&T paid Apple a cut each month for each contract; now it is subsidized but there is no monthly fee to Apple from AT&T.

    It may be a bit early to be comparing the costs, as, so far, all of these numbers are unofficial. I think that we can be sure of the $30 data charge, but the lack of included text messaging we do not know for sure yet, do we?
  • hyedipin
    More reasons why it will suck again to Own one and to use it on AT&T.;
    To tackle the problem of jailbraking and unlocking, they will now require you to activate it at time of the purchase.. More reasons to push people to buy Iphone v1, making them think it will be a better deal.

    Just because the newer one will be much more expensive, doesn't justify the high price of the original one.

    This is complete cheating. AT&T; pays Apple much higher than $200 per phone. It is a scam, and Apple is selling out!

    Just make the iPhone $600 or $700 and sell it unlocked. That's the free spirit of once known as Apple.. I hate all these phone companies who sell handsets to US Carriers.
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