AT&T "No Commitment" iPhone Pricing: No Bargain

Word on the street is that AT&T is finally preparing to add a new (but previously announced) pricing option for the iPhone 3G that does not require committing to a two-year data plan, or activating on site. But the offering (as outlined in a supposedly leaked presentation on Boy Genius Report) is so expensive--$599 for the 8GB model and $699 for the 16GB model--and so loaded with restrictions that it's hard to see who'd benefit from the deal, which supposedly will be offered starting March 26.

For starters, the contract-free price will only be available to existing AT&T customers--and there's no indication that the phone would be unlocked so that you could use it on someone else's network. Also, most people will want a data plan, so the issue then becomes how much you save if you want to opt out early from a commitment.

Let's say you're not eligible for the subsidized contract pricing ($199/$299). You can still buy an iPhone at the "early upgrade" price of $399 (8GB) or $499 (16GB) with a two year contract. Should you decide to opt out after a month of service you'd pay $175 for early termination, which would bring your outlay to about $575 for the 8GB phone and $675 for the 16GB phone. That's already a bit less than the no-commit price--and bear in mind that the termination fee would go down for each month you used the phone.

Since other costs (activation fee and monthly voice and data usage) would presumably remain constant regardless of how you purchased the phone, there doesn't appear to be any upside to the no-commitment pricing. The leaked AT&T presentation says the offer is meant to provide handsets to current customers who want to give them as gifts, add a line, or upgrade early. But my math suggests that even if you've lost your phone and want to replace it, you'd be better off starting over by buying the iPhone at the early upgrade price, and taking the two-year data plan (which you can cancel early if need be).

The no-commitment price option was leaded the day after Apple announced a slew of changes coming this summer to the iPhone operating system. These changes will presumably make the 9-month-old handset more appealing to new users. However, the cell phone competition is getting intense, and some predict newcomers will put pressure on iPhone prices.

No word yet from my AT&T contacts as to the accuracy of the leaked presentation, by the way.

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