Wednesday, June 18, 2008

Is the New iPhone Really Cheaper?

One of the selling points of the iPhone 3G over its predecessor is its lower price. But, as this table from Gizmodo shows it is not clear that is actually true:

While the upfront cost to the customer of the new iPhone is cheaper, AT&T's additional charges of $10 a month for 3G and $5 a month for text messages add up to an additional $360 over 2 years, which is more than the $200 price decrease of the new iPhone. When it comes to cell phones, the upfront price of the phone is kind of irrelevant. It is the price of the phone + the service that is important.

I wrote previously that I don't understand why people spend so little on their TVs and a similar question could be asked about cell phones. Spending an additional $100 on a phone you use for 2 years works out to just $4.17 a month. Most customers wouldn't think twice about an extra $5 a month being added to their bill, but would find an extra $100 for a phone to be a big deal. And yet over 2 years, $5 a month actually adds up to more.

Given that the cell phone is the most used/important piece of technology for many people and that phone bills go for $75 a month and higher, it is kind of surprising that more people don't spend $600 ($25/month) or more to get the best phone possible. Why not spend at least 25% of the total phone and service bill on the phone itself?

Last year I boldly (and completely erroneously) predicted that the iPhone would be a flop. But, as most of my objections have been rectified (3G, GPS, Exchange support, 3rd party applications, wireless iTunes access, and lower price), and the others have turned out not to be a big deal (lack of a physical keyboard, AT&T only, durability concerns) I will join the bandwagon and say that iPhone 2.0 is going to be a big hit.

That is not to say that the iPhone 3G doesn't still have some issues. 2.0 megapixels is below average for a camera and the inability to capture video is puzzling. It is also not clear why they haven't added the ability to cut and paste or MMS support. And Flash support is really needed for a complete web browsing experience. But, I guess they have to leave some reasons for people to upgrade to iPhone 3.0.

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