Geoff Duncan

Apple has announced the iPhone 3G, its multitouch-powered combo mobile Internet device, phone, and media player. It's not much of an exaggeration to say the iPhone has largely defined the mobile industry for the last year and a half. It's been kind of fascinating to watch: some companies have tried to compete with the iPhone, offering various knockoffs and imitation devices that incorporate a selection of iPhone-like features with the virtue of, well, not being an iPhone. Others have tried to downplay the impact of the device, saying Apple is unlikely to ever capture a significant share of the mobile market, or claiming it's just a toy for Apple fans that has no real-world relevance.

Apple's iPhone 3G

But the entire industry has had to cope with the iPhone since it was announced in January 2007, and with the iPhone 3G—and particularly the iPhone 2.0 software update, coming soon—it looks like that response period will be extended. Without getting into a long feature list, with the iPhone 3G Apple is attempting to address the most widely-cited shortcomings of the original iPhone by improving its connectivity (using AT&T's hurriedly built-out 3G network), adding "enterprise support" (which largely means compatibility with Microsoft Exchange), creating an ecosystem of third-party applications and games (via the App Store), and—perhaps most importantly—lowering the price. The 8 GB edition of the iPhone 3G will retail for $199, a full $200 less than the current price of the 8 GB original iPhone. The 16 GB edition will be $299, also $200 less than the $499 asking price for the 16 GB version of the original iPhone. And 16 GB iPhone 3G buyers will be able to choose one with a white backing, if they like. Oooh.

But is the iPhone 3G any cheaper? The sticker price of the original iPhone was enough to put me off the device entirely, and for a brief moment—we're talking very brief—Steve Jobs' unveiling of a $199 price tag for an iPhone made me think "Well, gosh, that's not as ludicrous." And then it hit me: the cost of the iPhone 3G is actually worse than the cost of the original iPhone…once you figure in the price of AT&T service.

In the United States, iPhones—assuming you're not one of those folks who unlock them to use on other GSM networks—require a two-year service contract with AT&T. The minimum pricing for voice and data service is $49.99 a month for 450 minutes of talk time, plus another $20 per month for unlimited data service and (I think) up to 500 SMS messages. Calculate that over the minimum two-year span of the contract, and iPhone buyers are paying AT&T:

($49.99 + $20)/month × 24 months = $1,679.76

…over the minimum life of the contract, not counting taxes and fees. Add the cost of the iPhone itself—$399 or $499, and this after Apple dropped the initial sky-high retail price—and iPhone users are spending over $2,000 in the first two years. And that's the cheap service plan: users who want to spend more certainly can. And it's just two years: if you want to use the phone longer, you pay more.

Although AT&T hasn't yet revealed all the details of the service plans it will offer with the iPhone 3G, the initial glance seems to indicate the net cost of owning an iPhone 3G will be higher than the original iPhone over the first two years—even factoring in the $200 Apple has knocked off the retail price. AT&T's 3G data service will be $30 a month on top of the $49.99 voice service, meaning iPhone 3G customers will be spending:

($49.99 + $30)/month × 24 months = $1,919.76

…over two years. That's $240 more than the initial low-end iPhone service, and already more than enough to offset the $200 customers allegedly "save" off the purchase price of the new iPhone. But wait, there's more! AT&T's new iPhone 3G service plans will apparently include no SMS messages. None. AT&T typically offers some minimal SMS messaging capability (200 messages a month) on its rate plans for about $5 a month; that would add another $120 to the cost of iPhone ownership over the course of two years.

Let's sum up:

Now, I understand many people are far more reliant on mobile devices than I ever hope to be, and that some folks partially offset the cost of an iPhone and service by ditching things like landline phone, which cost a bare minimum of $600 over two years in many areas of the country, and often double or triple that for what most people consider "basic" everyday phone service.

OK, so here's my thing:

I'm sure iPhones are very cool. I just don't seem to have any trouble thinking of more necessary—or, dare I say, even cooler—things I can do with that kind of money. In fact, I don't even spend $2,000 on a computer over the course of two years!

I freely admit I have (in the past) spent more than $2,000 on a primary computer, but I haven't done that in the 21st century. And that last, ancient, wizened over-$2K computer? It's still in use 24/7. (In fact, it probably sent you this text.) So the amortized cost of that machine (barring connectivity and power) is getting close to $200 a year. Once could argue that omitting connectivity fees makes a cost-of-ownership comparison to an iPhone unfair…but I'd get to amortize that cost against anywhere from five to thirteen other computers that share the same connectivity, so I'm not dodging as much as one might think.

If Apple wants me to spend $2,000+ over the court of two years for some sort of device—any device—they're going to have to make a more compelling case.

So now Gentle Readers may wonder what I spend for mobile phone service. I've only had a mobile phone for a couple years. I admit mobile phones have their uses, but they don't rock my world. So far my costs of ownership—including hardware costs and service—has been well under $100 a year. And, yes, I consider it a rip-off.