When the iPhone was introduced in 2007, it sold for $399. A couple months later, you could buy one for half that. Some iPhone models later dropped to $99, and now AT&T is selling the iPhone 3GS for the enticing price of $49. Sounds like an amazing deal.
The problem is that the upfront costs of an iPhone—or any subsidized phone in which you’re locked into a two-year wireless contract—are only a tiny fraction of what you’ll pay over time for using it. By one account, the average iPhone user pays a $95-a-month bill to AT&T, and, doing the math to see what a smartphone really costs over time, once all the fees and plans are added up it’s likely you’ll fork over around $2,500 over a two-year span. So basically, the latest iPhone markdown amounts to $50 off of what’s really a $2,500 purchase. That’s a discount of a whopping 2%.
What’s more, there’s good reason to believe that handsets and data plans are only going to get cheaper—because now that the early adopters have thoroughly adopted the technology, manufacturers desperately want to get the masses to upgrade from standard cell phone to smartphone. The only way they’re going to accomplish that goal is to lower the price to the point that it’s nearly a toss-up between the two, so that most consumers would just go for the more advanced smartphone whether they’ll really use its full capability or not.
The WSJ reports that T-Mobile and other wireless providers are “heading aggressively down market” with lower price points to attract consumers who so far haven’t shifted to smartphones. Instead of simply pushing for ever-faster and more-advanced technology, the providers are also pushing for cheaper handsets—which don’t have to be subsidized, and therefore consumers wouldn’t have to be locked into long contracts—and cheaper data plans. Several providers are selling monthly 200-megabit data plans for $15, and T-Mobile’s cheapest plan is only $10 a month.
Combine that with a reasonable talk-messaging plan and you’ve got yourself a smartphone that’ll do just about anything you’d want—with the exception of impressing strangers because it won’t be the sleekest, newest model out there.
But if you’ve held out this long without a smartphone, you probably don’t care about impressing people, keeping up with the Joneses, or any of that guff. You probably care more about your own bottom line. Not just the upfront cost, whether that’s $399 or $99 or $49, but what you’ll wind up paying in the long run.
You’re also probably mindful of how quickly things can change, and that what seems like a good price today may look like a ripoff in the rear-view mirror. What with Verizon soon rolling out its iPhone soon, with new Android phones coming out left and right, and with moves from providers like T-Mobile initiating what could be a consumer-friendly price war, it’s a good time to keep your options open, even if iPhones are selling for $49. As Fortune’s Seth Weintraub puts it when writing about the trend for less expensive smartphones and provider packages:
With technology moving so fast, it seems shortsighted to sign up for a two year plan.