Many folks are celebrating the release of the iPhone 3G next month as a great price drop. The 8GB iPhone drops from $399 to $199, and you get the higher speed (if you use the phone in a 3G network area—generally large urban areas). Few look beyond the initial buy-in cost and calculate the total cost of ownership.
Unless you jail-break your phone, the iPhone in the US is locked-in to a 2-year contract with AT&T. The minimum plan with the current model phone is $40 per month for voice and $20 per month for data (and includes 200 SMS messages per month). That’s $1,440 for the service and $400 for the phone, totaling $1,840 TCO for the current iPhone. But the new, less expensive 3G phone requires a 2 year contract that costs $30 per month for data, and doesn’t include any SMS messaging. Although not announced yet, adding 200 SMS messages to the iPhone 3G plan will probably cost $5 per month. So guess what, the TCO on the new iPhone will be $2,000 ($200 for the phone and $1,800 for the service).
None of this is to say that the new iPhone isn’t worth $160 more to the user. With its new features, it probably is. The point here is that the better acceptance of the new iPhone because it only costs $199 instead of $399 illustrates the “get it now” attitude of our culture and the unwillingness to deal with total costs as long as the monthly costs can be squeezed into the budget.
Update: Gizmodo has a good price comparison.
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