First Look: How the iPhone service plan measures up

Assuming shoppers can get over the starting price of $499—and going by the lines forming outside Apple stores, plenty of people already have—another aspect of owing an iPhone may give the budget-minded pause: what AT&T is charging for service. At $59.99 a month, the minimum cost for the mandatory two-year service contract with AT&T is $1,439.76 for the life of the contract.

Spending nearly $2,000 on a mobile phone and two years of service might seem extravagant, at least until you compare the numbers to other offerings. Someone getting a comparable voice-and-data package from T-Mobile will be paying the same $59.99 monthly rate charged to an iPhone user, while Verizon customers who select the BlackBerry Voice and Data Choice Bundle will be paying $79.99 per month, or more than $1,900 over two years—and that’s without factoring in the cost of their BlackBerry. While AT&T customers who don’t have an iPhone can get a voice and data plan for $49.98 a month, it doesn’t include the unlimited access that the iPhone’s service package will offer.

The bottom line? The cost of service plans for the iPhone are pretty comparable to what’s out there for other mobile devices. And the way Apple and AT&T have laid out the plans, combining voice and data, figures to take a lot of the frustrating guesswork out of choosing a plan for consumers.

“The most compelling/unique component of the AT&T/iPhone monthly service package is that it packages voice and data together into a single priced package,” said Jill Aldort, an analyst with Yankee Group. “This simplifies the buying experience and takes the mystery out of mobile data pricing.”

Service Plans Compared

Vendor Starting monthly price Minutes per month Data Text messaging Length of contract Activation Fee
AT&T for Apple iPhone $59.99 450 Unlimited access 200 per month, included in the service Two years $36 per line
AT&T $49.98 ($39.99 for the monthly voice plan, plus Smartphone Connect at $9.99 per month) 450 5 MB 200 per month, for an additional $4.99 per month One year $36 per line
Sprint-Nextel BlackBerry Unlimited Email and Web - Walkie-Talkie $49.99 None (see notes field) Unlimited access Users can order Sprint Easy Office text messaging service for an additional $20 per month. (see notes field) Two years $36 per line
Verizon's Blackberry Voice and Data Choice Bundle $79.99 ($39.99 for the voice service, $40 for the data access) 450 Unlimited access $0.15 per each message sent or received. One year (see notes field) $35 per line
T-Mobile Blackberry Minutes and Mail $59.99 1000 Unlimited access Unlimited text messages Two years $35 per line
Verizon (America's Choice Basic) $39.99 450 N/A $0.15 per each message sent or received. One year (see notes field) $35 per line

Source: Company reports

For minutes per month on the Sprint-Nextel plan, users pay as they go—20 cents per minute for voice calls plus 20 cents per minute. for long-distance calls. Domestic off-network roaming calls are 50 cents per minute with an additional 25 cents per minute for long-distance calls. Sprint-Nextel’s text messaging service requires a separate $15 activation fee. For both Verizon plans, users can upgrade to a two-year contract in exchange for a free phone every two years.

An interesting component of the iPhone service plans is the unlimited e-mail and Web offerings—customers only need to pick how many minutes they need and how many SMS text messages they figure to send. Analysts say this move will broaden the appeal of the iPhone beyond the traditional market for smartphones.

“The value proposition of most smartphones is that they’ve mostly appealed to business professionals,” explained Kevin Burden, the senior manager for mobile devices at consumer research group Telephia. Those users turn to smartphones for things like e-mail and running back-end applications such as customer-relationship management software.

As a result, Burden said, “Most consumers don’t get too jazzed by smartphones, they get confused by them.”

Apple is attempting to counter this confusion by flipping the conventional phone-marketing wisdom on its head. Burden says Apple’s ad campaign —which stresses the iPhone’s multimedia applications and Internet browsing before adding that oh yeah, it’s also good for voice conversations—is a new way to approach an audience that few smartphone makers or mobile service carriers have courted.

“No one has ever gone after the consumer segment the way Apple is going after the consumer segment,” he said.

On top of the ad campaign, Apple’s also using its reputation to set itself apart from other players in the mobile phone market. “Apple is really positioning the iPhone around the entire Apple experience—being able to activate the service through iTunes and sync personal data to the phone through iTunes,” Aldort said.

That promised Apple experience is the rationale behind the $499 and $599 price tags on the 4GB and 8GB model phones, Burden says.

“Apple’s mantra—they’re never first to market. They tend to take something that’s already in the market and they just make it better,” he said. As for the iPhone, “They better do it that way because that’s the only way to justify that price tag. You’re paying for superior applications that were once difficult to use.”

Some of Apple’s historic ability to streamline and simplify formerly-complicated products may have rubbed off on AT&T, given the straight-forward nature of the service plan pricing. Anyone who’s studied the menu of data plans available via American mobile service carriers knows how confusing it can be to compare different packages. That will expose more consumers to the mobile data market in general, Aldort says, which, in turn, will help build a new customer base for smartphones.

[ Lisa Schmeiser is a writer whose work has appeared in Macworld and Investors Business Daily . ]

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