Owning the latest gadget is an obsession for quite a lot of us, especially with the iPhone. AT&T has a two year contract period but Apple releases hardware updates yearly. AT&T sells the iPhone on a subsidy expecting to recoup the costs over the two year contract period. Everyone who buys an iPhone knows this. Yet when AT&T prices the iPhone 3GS closer to retail price for existing customers, the backlash was immediate and huge. There were online petitions and endless tweets to protest against the AT&T decision. All this for a device upgrade which is more evolutionary than revolutionary (unlike the iPhone to iPhone 3G upgrade).
But in all the discussions and petitions, one major point was usually absent. How much does it actually cost to own an iPhone?. If the retail price of iPhone is closer to $600 and At&T sells it for $200, then At&T must recoup that $400 over 2 years. It also has to make a profit over and above that. Which simply means that the 2 year contract is very lucrative to AT&T. How lucrative ? Without access to AT&T's records it will impossible to guess, but the best we can do is compare the cost of owning an iPhone to equivalent smartphones like Palm Pre and Android G1. The hard work of actually doing the comparison has been done for us by BillShrink (BillShrink is a free web application which can recommend the best and cost effective cell phone plans). With a 2 year unlimited contract Android G1 costs $3,150, Palm Pre costs $2,600 and iPhone costs a whopping $3,800. The iPhone costs $1,200 more than Pam Pre and $650 more than G1. keep these figures in mind when you are shopping around for the next smartphone.