iPhone 3G: Is $199 a deal?

Published June 12, 2008

After months of rumors and speculation, Apple's highly coveted iPhone is getting a makeover. Starting July 11, consumers will be able to purchase the new iPhone 3G for $199 in 8GB, one-third the cost of what first-generation model originally sold for. (A 16GB model is also available for $299, a $200 drop from the old one.) These phones will not only access the Internet at faster speeds using AT&T's 3G network, but they'll also come with built-in GPS and a slew of new apps via Apple's iPhone 2.0 software update. If ever there was a time to buy an iPhone, now is definitely it.

But, despite having a lower price than its predecessor, is the cheaper iPhone 3G really a deal? Below are a few factors you should consider before buying the new iPhone.

AT&T has quietly raised the price on its unlimited data plan for the iPhone 3G. Unlimited data now goes for $30/month, an increase of $10. Factor in your monthly voice plan, which starts at $39.99/month for 450 minutes, and you're paying a minimum of $69.99/month. That's not horrible, but since you're locked in for two years, that's a grand total of about $1,855.
The iPhone 3G can't be bought online. AT&T is mandating that all iPhones be purchased in store, along with a $36 fee for activating your phone. (No more unlocking a phone without a service commitment.)
Most cell phone service providers charge a cancellation fee if you terminate your contract prematurely. AT&T charges $175 if you terminate your contract after 30 days (there's no penalty if you cancel within those first 30 days). Upon terminating your contract, customers must also return their phone. Assuming you buy the $199 model, at a minimum you're now out $374. If you cancel, make sure it's well within your first 30 days of service.
Unless you've fulfilled your two-year contract with AT&T, current iPhone owners who want to upgrade to the 3G model must pay full price for the new model.
Under the new agreement between Apple and AT&T, AT&T is no longer required to give Apple a cut of their revenue from iPhone sales. This means Apple is taking a pay cut with the new iPhone. It's possible, although far from a given, that Apple might make this up by charging its customers for services that were previously free, such as software updates.

All of this won't necessarily turn you off, but if you want alternatives, what's a smartphone lover to do? Below we compare the iPhone 3G with a few choices from Verizon, T-Mobile, and Sprint.

AT&T: No other smartphone has garnered the amount of publicty the iPhone has, and rightfully so. The new iPhone 3G is a touch-sensitive smartphone that packs GPS, a 3G radio, OS X, music- and movie-playing capabilities, and more — all inside a svelte, elegant package. Voice plans start at $39 while unlimited data now goes for $30.
Cost for 2 years: $1,855 (one-time phone purchase + voice and unlimited data).

Sprint: If it's a touch-screen phone you're after, LetsTalk.com offers the Sprint HTC Touch smartphone at a price low of $49.99 after this $100 mail-in rebate. The phone features built-in GPS, a touch-sensitive screen with tactile feedback, Bluetooth with A2DP support, and a microSD card slot. Voice plans start at $29.99 with all-you-can-eat data at $15/month.
Cost for 2 years: $1,105 (one-time phone purchase + voice and unlimited data).
Savings over iPhone 3G: $750

Verizon Wireless: Let's face it — Verizon Wireless isn't known for it's selection of phones, but the guys in red recently picked up the iPhone's biggest nemesis, the Blackberry Curve 8330. It packs a full QWERTY keyboard, microSD card slot, Blackberry 4.3 Desktop software, and more. The best we could find is $149.99 after a $150 mail-in rebate (rebate available after purchase) at LetsTalk.com (search for "Verizon Curve 8330".) Voice plans start at $39.99 with unlimited data at $44.99. Rumor also has it they'll get exclusive rights to the forthcoming touch-screen Blackberry Thunder.
Cost for 2 years: $2,141 (one-time phone purchase + voice and unlimited data).
Savings over iPhone 3G: -$286. Verizon customers would actually save money by switching to AT&T and the iPhone 3G.

T-Mobile: Like Verizon, T-Mobile is ripe for picking Blackberrys, but bargain hunters can currently get the Wi-Fi-capable T-Mobile Dash smartphone for free and make a $50 profit after this $50 mail-in rebate at LetsTalk.com. The Windows Mobile phone packs a full QWERTY keyboard, 1.3-megapixel camera, and a microSD card slot. Voice plans at T-Mobile start at $29.99, and unlimited data goes for $39.99.
Cost for 2 years: $1,582 (voice and unlimited data - $50 rebate).
Savings over iPhone 3G: $273

Overall, the $199 price point on the new iPhone 3G may sound appealing, but there are many variables to consider before making the jump. Future upgrades, new apps, and third-party accessories could turn this dream phone into an expensive purchase, so make sure you're ready to pay a little extra in the long term for what many consider to be the best smartphone available.

Louis Ramirez is dealnews' Features Editor.

DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).

iPhone 3G: Is $199 a deal?

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