iPhone 3G is faster, but cheaper?

Apple claims the iPhone 3G is “twice as fast and half the price” compared to the original iPhone. Given the demos Apple presented during Monday’s keynote, and other tests of 3G vs. EDGE we’ve seen, the “faster” claim appears to be a fair one. But what about that second part?

Apple’s price claim is based on the $199 price tag for the 8GB version of the iPhone 3G compared to the $399 price of the the 8GB version of the original iPhone. However, that’s not the whole story. As Dan Moren pointed out yesterday, the financial arrangement between AT&T and Apple has changed with the introduction of the iPhone 3G; at least part of the drop in price is due to AT&T subsidizing the new iPhone.

AT&T is recouping those subsidization costs in two ways. First, it appears that you won’t be able to walk out of an AT&T store or an Apple Store with an iPhone 3G without first committing to a two-year AT&T contract. (With the original iPhone, you could plop down your $399 and walk out the door with a phone, to do with it as you pleased.)

But more important, at least when it comes to the claim of “cheaper,” AT&T has raised the price of monthly data plans for the iPhone from $20 to $30 (that’s for individual plans; business-plan rates increased, as well). Multiply $10 more each month by the number of months in a two-year contract, and the data-plan cost has increased by $240.

In other words, the total cost of ownership of an 8GB iPhone 3G—the cost of the phone plus the additional cost of the wireless plan—is actually around $440, $40 more than that of the original 8GB iPhone.

Now, granted, the higher-priced data plan is going to give you considerably-faster data speeds, so it’s not as if you’re paying more and getting nothing in return. And the new iPhone is obviously a much better phone than its predecessor. Just be aware that you’re not really paying half the price for those privileges.

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