iPhone 3G True Costs to Own

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With today being July 11th, and the official first sales day of the new iPhone 3G in the U.S., one of the things I've been looking at is the costs associated with this new iPhone 3G. I purchased my 4GB iPhone (new) as part of the closeout sale ($299) when they discontinued it in October of last year.

At $299, my box included a 4GB iPhone, headphones, power adapter, and an iPhone Dock. The 3G iPhone does not include a dock, which can be purchased for an additional $30.

The cost of upgrading to a 3G iPhone appears to have a lot of hidden costs associated with it:

    +$30 for iPhone 3G Dock
    +$5 a month for 200 Text Messages (+$120 over the length of the 2 year contract)
    +$10 a month for 3G Service (+$240 over the 2 year contract)
    + $18 upgrade fee (if you are upgrade eligible)
    + ($100 if you are not upgrade eligible)
All of this comes to a total of $408 in additional costs over the original iPhone, added with the purchase price of the iPhone itself ($199 or $299) results in a total of upgrade cost of $607 or $707, to as much as $707 and $807 without upgrade eligibility. With 3G and GPS being the only real features being brought to the table with the 3G iPhone, I'm finding it hard to justify the rather costly upgrade.

Keep in mind that previously, the monthly fee for AT&T in the US was $59.95 with 200 Text Messages and Unlimited EDGE data. This amounted to an additional $20 fee over AT&T's lowest cost service, but for the same amount of messages and data on a 3G plan, the cost is actually $74.99, making the iPhone premium $35 for those who were not already iPhone owners.

Last year when the iPhone arrived, the calculations for the cost of ownership over the length of the 2 year contract totaled $1440 for monthly service fees, along with the cost of the iPhone ($599, $499, $399, or $299 depending on when it was purchased and with what capacity), bracketing the total cost of ownership from $1739 ($299 iPhone 4GB with standard plan) to $2039 (8GB iPhone with standard plan purchased early at $599) or $1939 if the $100 coupon for the Apple store for early adopters is taken into account). An iPhone 3G this year will cost $1680 for monthly service (without 200 messages) and $1800 (with 200 messages). Adding in the dock ($30), and the iPhone ($199 or $299), yields a total cost of of $2029 (8GB iPhone 3G + Dock + 200 messages) to $2129 (16GB iPhone 3G + Dock + 200 messages).

Those who balked at the $499 and $599 initial prices of the original iPhone should still be balking at paying $199 or $299 for the iPhone 3G as the true cost of the iPhone 3G is almost exactly the same as the original iPhone (there's a $10 difference between the 8GB iPhone 3G and the original $599 8GB iPhone -- however, if the $100 Apple coupon for early adopters is taken into account, the original 8GB iPhone winds up being $90 dollars cheaper than the 8GB iPhone 3G. Interestingly enough, many people do not realize the price difference is only $10, and as a result, the demand for the iPhone 3G is even greater than the original iPhone. Those who purchased an iPhone at the $200 discounted price are even better off, as they essentially wind up with iPhones costing $190 less than the equivalent-sized iPhone 3G.

Taking into account the upgrade costs of $607 and $707 for original iPhone owners, it seems like an expensive upgrade for 3G data and GPS (and possibly more data storage space). This amounts to roughly $25 and $30 a month more for 3G capabilities -- those who need the speed will pay for it, but for all other owners of the original iPhone, I think it's likely they won't be surrendering them anytime soon.

One of the things that I see happening is that as users upgrade to the iPhone 3G, their older iPhone is resold back on the market as either an unlocked iPhone or as a iPhone that could be resubscribed to AT&T at the original data plan. With AT&T claiming that they will sell iPhones without a commitment plan at $599 (8GB iPhone 3G) and $699 (16GB iPhone 3G), there is a substantial resale value for secondhand iPhones which may end up as yet another AT&T subscriber. Currently, even used iPhones may be resold for more than their original sales price -- a look at eBay reveals several unlocked 16GB iPhones which have fetched $1000 or more, nearly $400 over the original price.

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