iPhone 3G S Price Tag: The Facts

Artwork: Chip Taylor
Okay, the iPhone 3G S is out. Lines are shorter than last year, with public enthusiasm dampened due to a host of factors, ranging from a less-compelling upgrade story this time around to the return of online ordering and at-home activation.

Or maybe it's the price.

Although new AT&T customers can buy the iPhone 3G S at the lowest prices, many existing iPhone owners cannot. And that has turned some of them into a spit-spewing, pitchforks-in-hand mob. More than 14,000 have signed a petition on Twitter demanding satisfaction.

Just as important is that the whole mobile phone pricing structure is a Rube Goldberg-like construction that's right up there with new car and airline ticket pricing on the Confusion Meter.

Who can figure it out? Not even the experts.

We're not sure if we understand it all, but we have answers to some questions on pricing. We think.

I don't use AT&T now. How much do I pay? Thanks for asking the easy question first. If you're not currently paying an AT&T cell bill, or you want to set up a new account -- say you and your spouse or partner have a multi-line account and you want another line, this one under your own name -- you pay the fully-subsidized price: $199 for the 16-gig iPhone 3GS, $299 for the 32-gig and just $99 for last year's 8-gig iPhone 3G.

Caution: The answers get iffier from here on out.

I have an iPhone 3G I bought in the last year. What's the deal for me? Confusion begins. To find out if you're eligible for what AT&T calls "upgrade" prices -- the $199/$299 for the iPhone 3G S, $99 for the iPhone 3G -- you need to go to AT&T's site and run the qualification widget by entering your phone number and password to your online account. If you haven't created an online account with AT&T, you'll have to do that first; it takes about 5 minutes.

An even easier way is to call *NEW# -- that's 'star symbol,' 639, 'pound' sign -- from your iPhone. You'll receive a text message from AT&T in the next few minutes telling your whether you're eligible, and if you're not, when you will be.

What are my chances at getting the lowest prices? Depends.

Oh, for Pete's sake. Depends on what? Depends on how much time is left on your two-year contract with AT&T and how much you spend on your cell phone bill. (It always comes down to money, doesn't it?)

According to AT&T, which keeps the secret of who pays what under lock and key, the bigger your monthly bill, the better your chances of qualifying for the lower prices on the iPhone 3G S. "In general, the more a customer spends with us, the quicker they become eligible for a price break on a new device," AT&T says in its FAQ on iPhone 3G S upgrade pricing. "For example, iPhone customers who spend more than $99 a month per line with us generally are eligible for an upgrade between 12 and 18 months into their contract."

AT&T's policy is pretty standard for the U.S. cell phone business, which ties free or inexpensive handsets to long-term contracts. If the carrier lets the customer out of the contract early, it could risk losing money on the customer, paying more to the phone maker than it gets out of the customer's wallet.

That doesn't mean the policy hasn't riled thousands of iPhone owners who have raged against the machine, claiming they're being treated like second-class citizens even though they've owned an iPhone since Day One.

But I've heard that AT&T relented this week, and will give customers a break on the upgrade price. True? Yes, but not for everyone.

On Wednesday, AT&T backed off a bit, and said that people who were earlier eligible for the upgrade price in July, August and September would, in fact, be eligible immediately. (There was no mention of customers eligible after today, June 19, but before June 30; apparently AT&T believes that they can wait a few days.)

The caveat: To qualify, you have to have been spending an average of $99 or more a month on your cell phone. AT&T made that clear in the FAQ when it answered the question: "Does this change only apply to iPhone 3G customers who spend $99 or more per month?"

AT&T's answer? "In most cases, yes."

I bought my iPhone 3G in October 2008. So I'm screwed? Seems so. If you want an iPhone 3G S now, or at any time before your upgrade date, you'll have to fork over the $200 surcharge, which means the 16-gig model will cost you $399, while the 32-gig will run you $499.

You are, according to crisis communication expert Dallas Lawrence, one of the losers in the AT&T upgrade game. "Rather than embrace a policy all across its subscriber base, AT&T chose a policy of picking winners and losers, separating the two in some cases by just weeks or pennies spent on monthly bills," Lawrence said yesterday when asked to comment on AT&T's upgrade price changes.

I bought a first-generation iPhone that uses AT&T's EDGE network. Why don't I get to upgrade at the lower prices? I've had my phone a lot longer than people with iPhone 3Gs. Welcome to the world of mobile phone pricing.

AT&T's not coming straight out and saying why, but it is refusing to let some customers with the original iPhone get the iPhone 3G S at the upgrade prices.

What really rankles is that last year, all iPhone owners were allowed to upgrade to the iPhone 3G at the subsidized prices because they had paid full price for the first-generation (that model had not been subsidized by AT&T). Now, however, people who didn't make that move last year are not offered the same deal.

That disparity has really pissed off some people. "So let me get this straight, my line shows eligible for upgrade on 8/11/2009 (18 months), but because I am not upgrading from an iPhone 3G, I have to wait until then even though someone who got an iPhone about 12-13 months ago can?" asked an AT&T customer identified as "TEXASEX1998" on the company's support forum. "We have a Family plan and spend over $300 a month with AT&T, but if I have to wait 18 months and someone who got a subsidized iPhone a year ago doesn't, I am bolting to another carrier."

For comprehensive coverage of the Android ecosystem, visit Greenbot.com.

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