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The True Price of the iPhone 3G

Why a new iPhone 3G may actually cost you more than the older model.


iPhone 3G

Apple iPhone 3G

Photo Courtesy Apple

Sure, the price of the iPhone 3G may be less than the last-generation iPhone, but in the long run, the price of the iPhone 3G will be higher. That's because the iPhone 3G's service plan is more expensive. But just how much more can you expect to spend?

When Apple and AT&T launched the first-generation iPhone in June 2007, the handsets were expensive. A model with 8GB of storage cost $599; a few months later, that price was dropped to $399.

AT&T offered three service plans for the first-generation iPhone. The least expensive plan was $60 per month (about $66 with taxes and fees), and included 450 voice minutes, unlimited data usage, and 200 text messages. A plan offering 900 voice minutes was $80 per month and one with 1,350 voice minutes was $100 per month; both of those plans also included unlimited data and 200 text messages per month.

Newer, Cheaper Models

Fast forward to July 2008: A new iPhone 3G with 8GB of storage sells for $199. That's a savings of $200 over the old iPhone, and the new model comes with 3G data service and built-in GPS, among other features.

That high-speed 3G service comes at a price, however: AT&T's available service plans for the iPhone 3G are more expensive than the plans that the carrier offered for the first-generation phone.

The least-expensive service plan for the iPhone 3G costs $70 per month. That includes 450 voice minutes and unlimited data. The plan with 900 voice minutes is now $90 per month and the option that includes 1,350 voice minutes has climbed to $110 per month.

And none of these plans include text messaging: A text plan that includes 200 messages per month will cost you $5. If you don't opt for a text plan, you'll be charged 20 cents per text message.

The True Price

That means that the cheapest service plan for the iPhone 3G will cost you $15 more per month than the cheapest plan for the first-generation iPhone. To get the phone discount, you'll have to sign a two-year contract (and, if you're an existing AT&T customer who's not eligible for an upgrade, you may not qualify for the subsidized price). Over two years, that $15-per-month increase will add up to $360--suddenly that $200 price cut on the handset itself isn't such a bargain.

The price of the service plan hasn't increased to a prohibitive level--and many users will find the new rates a small price to pay for high-speed Web access. But if you're interested in buying a new iPhone, remember what the true cost will be.

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