This Friday marks the introduction of Apple’s new iPhone with their exclusive provider, the new, new AT&T. As much as we might love the new phone, the AT&T Wireless telephony package coupled with an iPhone makes this one of the most expensive cellphone bundles ever to hit Mother Earth. In fact, payments on a midsize automobile might just turn out to be cheaper than an ongoing iPhone contract with AT&T. AT&T may fool everyone and come to their senses on pricing before Friday, but we aren’t betting on it. Our guess is that AT&T is delaying a pricing announcement until the day before the phone’s introduction so that all the dumbest people on the planet won’t have time to do the math. It just goes to show that pairing the marketing genius of Apple with the greedy beancounters at AT&T still spells T-R-A-I-N-W-R-E-C-K. Not that any self-respecting college stud would be caught dead in a Ford Focus, but just for grins, let’s do the math so that everyone has a few days to bask in the real cost of an iPhone.

First, the iPhone hardly qualifies as a bargain. At $499 for the 4GB model and $599 for the 8GB, there’s no pricier phone in the cellphone marketplace. To add insult to injury, AT&T has taken things one step further: NO REBATE WITH AN iPHONE even with a two-year cellphone contract. Suggesting they’re MIGHTY PROUD OF IT is just the beginning of our little tale of woe! So, assuming the iPhone is actually worth its retail price, you begin this exercise paying roughly a $250 to $300 sign-up premium compared to purchasing a new RAZR phone or high end PDA with a two-year AT&T cellphone plan.

And then there’s the matter of picking a cellphone plan. Even Verizon can’t hold a candle to the new AT&T. If you plan to use the iPhone in the manner in which it is being advertised, i.e. to surf the web, to watch YouTube videos, and to send all kinds of messages to everyone on the planet, then hold on to your hat wallet for the ultimate sticker shock. The cheapest individual cellphone plan starts at $40+ a month for 450 daytime minutes plus nights and weekends starting at 9 p.m. To take advantage of free calls to other AT&T phones (100 million wireless and wired phones), add another $20 a month. For earlier nights and weekend calling (7 p.m. instead of 9 p.m.), add another $10 a month. For unlimited data usage, add $40. For unlimited messaging, add another $20 a month. For phone insurance, add another $5 a month. Now add AT&T surcharges and taxes for another $20 a month. That gets us to roughly $155 a month plus the $10-$15 a month no-rebate penalty amortized over the life of the two-year contract because you chose an iPhone. So, the grand total for an iPhone works out to $600 plus tax for the only decent model plus roughly $170 a month for the required two-year service contract. Amortizing the hardware cost of the iPhone over 24 months brings our monthly cost to approximately $195 a month. The early termination penalty actually looks like a bargain with a plan like this one! Now the shocker. To lease a 2007 Ford Focus with air conditioning, you’re looking at less money per month although you’d make payments for additional years. But then, you may want to use your iPhone for more than two years as well… assuming you either win the lottery or have a healthy trust fund. Just don’t plan on more than three years, or it’s another pricey adventure paying Apple to replace the iPhone battery.

To give you a point of reference, our current Sprint family plan with FOUR PHONES and no discounts costs roughly $200 a month. It includes 2500 shared minutes, free calls between home and the four phones, free nights and weekends starting at 7 p.m., free tethering to four PCs (another $20 option per phone with AT&T), free roaming and long distance, free calls to other Sprint phones, and unlimited Internet service and messaging on all four phones. And the total hardware cost for the four phones including two Treos and two Katanas (the better RAZR) is roughly the same as purchasing one iPhone. Call us crazy, but we’ll stick with Sprint a bit longer. If you really want some fun, price out the cost of switching a family of four to iPhones. Then you can kiss that new BMW goodbye forever.

Pricing Update. We’re thrilled that our original article (above) produced dramatic price reductions within hours this morning. The new price is about one-third of the old one. You do think it was our article, don’t you? Steve Jobs has apparently worked his magic with AT&T just as he did with the music moguls. New pricing for the iPhone was just announced with unlimited data, visual voicemail, 200 SMS text messages, 5000 to unlimited night-and-weekend minutes, rollover minutes, and unlimited mobile-to-mobile calling each month. 450 daytime minutes will cost $60 a month while 1350 minutes will run $100 a month. Shared use family plans (700-2100 minutes) are $50 more with two lines activated. Great news for the iPhone and consumers. And there’s more good news. The entire activation and synching process for the iPhone will be handled using good ol’ iTunes in the privacy of your own home.


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This article has 10 comments

  1. I hope you didn’t spend too much time on this post since it is now totally inaccurate with the release of the iPhone pricing plans.

  2. Don’t you feel stupid now?

  3. You’ve put a remarkable amount of effort into a theory that was proven wrong pretty quickly!

    [WM: Yeah, ain’t that great! Not too much effort actually, and we’re delighted by the outcome. Can you believe they amended their pricing so quickly? Nerd Vittles Rulz! Just goes to show how overpriced the data plans at AT&T have been all along. We’ll be at the front of the line to buy one on Friday just like many of you.]

  4. Hey Apple Fanboys, calm down.

    This was just a hypothetical example given the prevailing rates at the time of publication.

    No need to treat the author like he predicted slavery would never end.

    Geesh…

  5. Since you were so wrong, why not take down the %$@# article instead of leaving it up to confuse people? Or at least put your mea culpa at the front of the article, instead of the end.

    [WM: We like showing off the egg on our face once in a while. It matches the car, don’t you think? And sometimes we even enjoy confusing people. We’ve always printed corrections and updates at the end of our articles (probably since you were in diapers). We do that so readers can get the context for the correction. Finally, it wasn’t a mea culpa as you put it. It was an amendment to accurately reflect what transpired later in the day. We’ve never laid claim to being a fortune teller. And, just for the record, AT&T changed their pricing strategy for the iPhone only. They still price gouge on data and messaging services with some of their other phones and PDAs. How many of those do you think they’ll sell after Friday? At least Apple had the good sense to recognize that the old pricing strategy would have killed the iPhone right out of the chute. So good for them.]

  6. Well, I charge my clients $50 a day for communications whether I send them an email or call them in person. AT&T’s rate plans plus the iPhone costs, amortized over 2 years is actually cheaper than the cost of the wireless modem in my laptop plus my cell phone and their two plans.

    Looks like a winner to me. Sign me up.

  7. Don’t worry about these guys, ward. They just need to feel justified for shelling out that much cash for something that’s barely worth half the price.

    What’s the big deal with the iPhone anyway? (BTW, Linksys has had a product on the market called iPhone for some time – can’t wait for the lawsuit!) It plays MP3s? Big F’n Deal! I’ve been carrying MP3-playing phones for a good FIVE YEARS now. Web surfing? I’ve been surfing the web on my phones for the same five years. Photos and videos? Yep – five years. So what gives? YouTube? Is that really the only thing that this phone offers that others don’t?

    Anyone willing to spend as much as they’re charging for this thing is a sheep – plain and simple. The most gullible of the most gullible, falling for the marketing hype hook, line and sinker. Those of you who are willing to wait in line to get one of these things deserve to have your wallets emptied.

    [WM: We used to write a lot of Mac HOW-TO’s but the Apple Kool-Aid drinkers got tedious. They’re a huge part of the reason Apple still has 5% of the desktop computer market instead of 95%. But who cares. We enjoy reading (and writing) rants once in a while.]

  8. It’s just a FAD. The keynote was full of bold faced lies. Everyone will find that out after they shell out their money for an overpriced Nano. It will definitely sell. I just hope non of my corporate customers switch to them.

    Also. Thank you for all your past articles on Asterisk. They have helped me immensely. Asterisk is really the main reason I switched to Linux. I almost have everything in my lab at home switched over. Hopefully I can start contributing back in the future!

  9. I can’t remember the exact number of iPhones that Steve Jobs wants to sell but its an absurd number (I think the Register had an article on it). Basicly the number was something like what one of the biggest phone companies on the market sells accoros multiple phones in multiple countries with multiple providors. Making the iPhone an AT&T product only had to be one of the biggest mistakes that Apple made in releasing the iPhone. One thing that I have heard that does make sense on the unit pricing is to look at the cost of an iPod…This gets you a lot closer to the iPhone’s cost and seems to make more sense ie if you have an iPhone you don’t need to shell out 300 for an iPod…Time to hit eBay and get me a nice used iPod for cheap.

  10. I am angry! No iPhone for Puerto Rico, no price changes for Puerto Rico, no NOTHING for Puerto Rico…
    I am sticking with my P-O-S Cell Phone Carrier from which most people in the US have never heard about (Centennial), but at least pricing and coverage are great (although data is slow, and phones are ugly)… Oh well, part of living in Paradise… Not-So-Techy Paradise

    [WM: Move to Charleston. We’ve got your weather PLUS the iPhone.]