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iPhone: it isn't the price I'm worried about

John Gruber has penned a rebuttal to Steve Ballmer's recent statement that the iPhone, an product that isn't even shipping yet, is priced too high to gain significant market share. I find myself agreeing with John's argument that the iPhone isn't priced too high. I'd plunk down $500 tomorrow for a device like the iPhone (and recall I haven't, much like most people, even touched one of these beasties yet), however, I'm not as convinced by the argument that Apple will sell boatloads of these things because they are priced like early iPods.

The rub with the iPhone isn't the price of the device itself, but rather the unknown price of the phone plan you'll be required to buy along with it. When I buy an iPod, it is mine free and clear. I don't need to pay a monthly service charge (which is signed in blood) to ensure that the darned thing will continue to function. That won't be the case with the iPhone. I'm almost certain that you will not be able to buy an 'unlocked' iPhone (that is an iPhone that you can use on any network, without having to buy a plan) for at least a year after its introduction.

'But how much could a phone plan cost, Scott?'

The truth is, we don't know yet. AT&T and Apple could be cooking up some special deal for iPhone buyers, but for the sake of argument let's just look at AT&T's current rates (as listed on Cingular.com) for the type of services that you would want on your iPhone to take advantage of all those super cool features. Here's the breakdown:
  • 450 minutes talktime per month (includes 5000 nights and weekend minutes): $39.99
  • Smartphone Connect Unlimited (this is unlimited data transfer, since an internet communicator is sort of pointless with a data transfer cap): $19.99
  • Messenger Starter (200 text messages per month, unlimited texts to other AT&T customers): $9.99

That's a grand total of $69.97 in services for your iPhone before taxes (and that's kind of on the low end of the available services. I'm sure lots of people will want more talk time, or more text messages.). Now, let's assume that Apple and AT&T will only require that you sign up for a year (I'm betting the iPhone will require a 2 year contract), that translates to about $839.64 for the first year of services (before taxes once again). Tack on $500 for the iPhone itself and you find that Apple's cool new phone is going to cost you $1339.64 (roughly).

Now, I know lots of people are going to point out that there are a number of unknowns about the iPhone, including what the service plans are going to look like. This is very true, however, Apple isn't the first company to come out with a super cool smartphone so we have some history with which to draw on. My current phone of choice is the Motorola Q, which is a Windows Mobile smartphone. I pre-ordered it for about $200 and signed up for a 2 year contract with Verizon. The Q sports EVDO, which is faster than the Edge network that the iPhone will be using, it can send text messages, browses the web, and does voicemail. It doesn't have WiFi, nor is the software that it runs as cool looking as the iPhone's. My phone plan/unlimited data/unlimited text messaging costs me about $85 a month which, in the realm of smartphone pricing plans, is a steal.

The iPhone is priced right, but the devil will be in the details of the service contract that comes along for the ride on one of those little marvels. Let's hope my worrying is unfounded, but something tells me the numbers listed in this post aren't going to be too far off the mark.



John Gruber has penned a rebuttal to Steve Ballmer's recent statement that the iPhone, an product that isn't even shipping yet, is priced...