For techies, particularly those who like Apple products, the new iPhone 3G is starting to look nice. The current iPhone already has a mess of cool features, but Apple’s adding speed, GPS, support for Exchange, and many other features to attract new consumers, particularly business consumers.
Most importantly, the price for the entry level iPhone will be lower than less sophisticated devices, only $199.
This price is highly subsidized by AT&T, the only carrier that will officially support the iPhone. For every customer purchase, AT&T provides $300 to $400 to Apple to receive the device. This subsidy comes at a great cost to AT&T, but they’re confident that it will take only two years to recover these costs. Why? iPhone users spend more.
The average phone bill of an iPhone user is $95, almost twice the average of all other customers. If you’re an average iPhone user, you are spending $540 more per year, or $1,080 over the life of the two-year contract, for the privilege of buying an iPhone for only $199. I think AT&T is recovering quite nicely.
Would you buy the iPhone at $199? It sounds like an attractive price at first glance. But what if you had to pay your total $1,279 up front? You’d get to keep your $50 monthly plan with this option.
The good news is this lower price might mean more competitive phone prices across all cellular carriers. The bad news is the higher subsidies may be covered by higher monthly rates.
Information on iPhone subsidy from AT&T Starts Subsidy War, Scott Moritz, Fortune, June 10, 2008.
Published or updated June 11, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 25 comments… read them below or add one }
The comparison between ‘average iPhone user bill’ and ‘average user bill’ is pretty meaningless, because anyone who buys an iPhone is likely to be a heavier than average user. To know whether AT&T really are going to rake it in, you want to compare ‘average bill (pre-iPhone)’ and ‘average bill with iPhone’ across the group of users that bought an iPhone.
I will be in line on July 11th!!!! Maybe I’m getting ripped off by At&t currently, but my bill is $85/month for just 900 mins/unlim night & wknd/1000 txts…so the extra $10/month for a full array of services is well worth it!
Not to mention that the sdk and app store is unlike anything else out there. That alone should sell this phone, as well as the fact that Apple sends out os updates frequently, unlike other phones that are a once and done purchase.
I bought the 16G i-phone when it became available (and paid *ahem* $500 for it), and it was one of the best puchases I’ve ever made. I love the mapping features, the abiltiy to approve blog comments from anywhere (I don’t admin my blog from my office PC), and calendar.
I was already with AT&T (Cingular, actually), when I purchased the phone – I have the most bare-bones plan – and the i-phone caused my wireless bill to go up $4.95 – that’s $30 a year that I feel is totally worth it. I just wish that I’d waited for this new version before jumping on the bandwagon – the extra speed would be nice.
No, I am definitely not an iPhone kind of person. I am very happy with PagePlus cellular, as I’m not one of those people who spends more. Getting value for the money is a bigger thrill to me.
I do love gadgety cell phones, but will never do a contract, and prefer the Verizon network. If the iPhone ever goes a la carte where one can buy one reasonably on eBay and then activate it on PagePlus, I might consider it. Meanwhile, I’m happy with LG phones.
“The average phone bill of an iPhone user is $95″ – I have an iphone and am on the $59 a month for 500 minutes day minutes & unlimited night/weekend with unlimited data/email. What are those people doing with their phones that they are spending that kind of cash?
That being said, best purchase I have made in years, no question.
$59 was the minimum plan for the previous version of the iPhone ($39 voice + $20 data). However, AT&T has upped the data cost for the new iPhone to $30.
AT&T requires a 2-year agreement, so that extra $10/month means an extra $240 over the life of the contract. Add that to the $199 price of the phone and the price is more than the $399 of the previous version.
Not a big deal since it’s more feature-rich than previously. But it’s misleading for people to tout the $199 price as some big discount compared to the previous $399 iPhone.
They upped the price of the data? Wow…that’s pretty dumb. Thanks Anne, I didn’t know that!
David, how is upping the price of the data plan a dumb thing? Makes perfect sense that faster data transfer would cost more.
I’ve waited a year for this iPhone, and I’ve saved $500 for it. It’s going to make transportation of all kinds so much easier (I can check if a bus is running late from my iPhone, and with GPS I’ll never get lost again).
They are only upping it because it is the iPhone – every other phone of theirs (ATT) is already running 3G, (and a lot of them have GPS already built in) and they are not going to be charged more. Don’t get me wrong, I have an iPhone from the first time around, but they are only doing it because they know that anything Apple can have a “surcharge” on it, because everyone will still buy it.
I would love to have gotten an iPhone, but it has to work on my Sprint plan which has a great rate. Someday the AT&T monopoly will expire ;-).
I work for ATT. The plans are reasonable. The company makes all their money off features and downloads. If you have impulse control, i.e. not obsessed with the latest game or ring tone, or don’t have any overages, you probably spend very little.
iPhone users can spend more because they have to have a data plan. Of course, why would you have an iPhone for voice only!
I will be on vacation when the new iPhone is released. Yippee!
people are just getting rip off by apple…anything new comes out…people just ussually gets suckered at all times….i love my lg voyager no questions ask…people are just stupid this days..
“people are just stupid this days.”
…as your grammar clearly shows.
wow, first of all “b2db0y” your name is dumb. and make sure you use the right grammar, because saying “people are just getting RIP off by apple” and “…just USSUALLY GETS suckered…” does not make you seem intelligent, and I do not trust the opinion of someone not intelligent enough to state one. and it is ironic that you say how people are stupid for being suckered into buying the latest gadgets and gizmos when you in fact, own a voyager, one of the latest cell phones there is.
way to be hypocritical ;D
I do not own an iPhone myself, but wish to god I could get one for my 14th. unfortunately, I doubt that’ll be a wish to come true.
I just wanted to say that the two people above me are very interesting. You can see the cross-section of our youth today, on the one hand you have the person that is not that eliquent with their words and has probably only read 10 books in their life, and on the other hand you have the intelligent person that has actually tried to improve their life and learn as much as possable. They are both probably the same age. Very interesting. Oh, and I am going to get an iphone with my next plan (here in 2 months) and I’ll have to come back and say if we are getting “ripped off” or not.
hi sara. can we have a meeting on the massenger please??
Genius! The I Phone is the greatest invention in the 20th century. I am not usually a high tech gadget kinda girl. I am frugal and, a stay at home mom and I am on a tight budget! I have an 8 g iphone and it is the best investment I have ever made. This phone does everything but poop! It even entertains my kids with free down load games and not mentioning I can look up recipes while grocery shopping, Listen to any kind of music anytime without paying for it. Thanks to Pandora. And who needs a GPS, Ipod, and cell phone, camera etc. When you have it all in one little Gadget.. I am praying that my husband will get me the 3G with free engraving for Christmas. Go Apple. Can’t wait to see what,s next!
Sherri Georgia Peach
Great post Sherri, but beware – my iPhone poops (when dropping calls, occasionally)!
I’m sorry Omar, I only have my iPhone now, I don’t think I can do messanger with it. Yes, I got my iPhone and to be honest I couldn’t be happier. I personally don’t think I’m getting ripped off. But I think that is a matter of opinion. If you were paying say, $50 a month on your phone then there is definantly going to be some feeling of being ripped off. Right now me and my husband both have them and I think our monthly bill is about $150. We have the smallest amount of minutes and 1500 texts and the unlimited data and the regular things you have to have. But I really can’t remember what it was like before I had my phone. :-) I’m officially hooked.
ok thanks for your Reply, my name is omar from libya after 2weeks iam going to canada so ineed to buy iphone can you tell me the best place in toronto and thanks for your care !?
I’m sorry Omar, I don’t have any idea as to where to go in Toronto. I live in Texas, and have never been to Canada. I’m sorry I can’t help more.
hi sara where are you live in texas and are you mary and how old are you and can you tell me more information about you please and thanks sara. but theres somthing ineed to tell you ilove the way you talk ok bay?
Creepiest guy ever… becoming infatuated with someone based on the way they type? Get a life, Omar.
HAHAHA! this made my day. “I love the way you talk”. Priceless
I only pay $70/month for my iPhone service.
450 minutes. (I only use 300… so I have *THOUSANDS* of roll-over minutes). More than I could ever possibly use.
Unlimited data, unlimited web, unlimited email, etc
I use 1 of those free apps for all my texting. Unlimited free text messages.
Grand total… for more of EVERYTHING than I could possibly use: $70 month.