Thursday, June 12, 2008

AT&T Fee Hike Means The New iPhone Will Actually Cost More

Consumer set to run out and buy the new lower priced iPhone will be surprised to know that the new rate hike from AT&T means their $199 iPhone will actually cost them more money over the life of their contracts.

The service plan will cost $10 a month more than the current plan, meaning an additional $240 over the life of the mandatory two-year contract with AT&T Wireless, the iPhone’s exclusive carrier.

Consumers with the current generation iPhone pay $20 a month for an unlimited Internet and e-mail use, and can send up to 200 text messages as part of that plan. However, those who buy the new iPhone, due out July 11, will pay $30 a month for the same services. AT&T has not yet made it clear as to whether text messaging will be part of that cost, or an add-on.

“That’s part of the pricing we’ll get into more detail about as we get closer to launch date,” said Mark A. Seigel, executive director of media relations for AT&T Mobility. “That’s not something we’ve discussed yet.”

The new iPhone were revealed earlier this week during Steve Jobs Worldwide Developers Conference keynote presentation. Pricing was set at $199 for 8GB version, and $299 for the 16GB version. Thats a $200 drop from the current prices of $399 for an 8-gigabyte iPhone, and $499 for the 16-gigabyte version.

The lowest-priced iPhone plan, now $59.99 a month, with $20 of that for data and the other $39.99 for 450 voice minutes, will go to $69.99 a month. If AT&T decides not to include text messaging in to that plan users could easily be paying upwards of $75/mo for their new plan.

AT&T points out that the data plan for the iPhone was lower than comparable plans for other smartphones, such as the BlackBerry, however the pricing might push a few users away.

“That $30 price point for Internet and e-mail is not uncommon,” said Bill Ho, research director for Current Analysis’ wireless services. “AT&T is aligning that plan with the prices for its other smartphones like the Treo or the BlackBerry.”

AT&T needs to make up for the subsidy of the new iPhones. Providing a lower up front fee and higher back end fee's allows AT&T to entice more users to switch to iPhones.

Overall, it will cost a minimum of $40 more for the new iPhone and contract, compared to the current pricing. A customer with the new 8-gigabyte iPhone will spend $1,878 over the life of the contract, compared to $1,838 for the current 8-gigabyte phone and agreement. A customer with the new 16-gigabyte iPhone will spend $1,978 over two years, compared to $1,938 for the a first-generation, 16-gigabyte iPhone and contract.

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