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Doin' the wacky AT&T math

As everyone has told us this morning (Thank you guys, we love you!), AT&T has announced their price plans. Christina got a post up about this earlier today. As I dragged my weary Mountain-Time-based self out of bed (after a night of random fire alarms due to a wonky 9-volt battery), I decided to see what all the fuss was about. You can imagine my surprise when I saw that AT&T was slapping a $400 premium onto non-contract phones.

In case you were up most of last night (like I was) and weren't reading that last line correctly, let me say that again: there is a four hundred freaking dollar premium for non-contract phones.

Follow the jump for more thoughts about this development.

In a world of $200 subsidies, this $400 premium made me sit up from my bleary stupor. Normally AT&T charges $200 more for the 'retail' price sans contract for hot desirable phones, not $400. Far be it from me to suggest that people enter contracts that they intend to break, but new and current iPhone users will be better served mathematically by signing up for the upgrade ($199 to transfer service to a new iPhone, phone included), pay for a month of service and then cancel the contract after 30 days, keeping the phone and paying the $175 early termination fee plus that one month of service, which will run about $70 plus $36 for activation.

This comes to about $450 plus tax versus what AT&T is asking: $600 plus tax. For the 16 6B model, this works out to $550 (or so) compared to the $700 sticker price. According to Apple Insider, AT&T is likely paying about $325 per 8GB iPhone direct to Apple. A $450 price tag still offers them a comfortable profit margin should the guilt start kicking in.

Given this hefty price tag, consider what the point of buying an iPhone outright gets you: basically a contract-free unit that you can hack, unlock and activate at will. Once you've paid the price, and the unit is yours, you can use it with insanely cheap pay-as-you-go plans, including inexpensive "unlimited" 3G data plans that may or may not work with the iPhone 3G. You get the new cool form factor and onboard GPS positioning, great for runners and bikers and such.

That being said, unlocking or hacktivating your iPhone comes with a bunch of drawbacks. Be aware that you're basically invalidating your warranty and customer support, and that your plan might not work correctly on the phone. You might, in fact, not have access to those 3G features you were looking forward to, mostly because no one has had a chance to test the $20 for 30-day-unlimited data plan with the iPhone 3G. Plus $450 is kinda pricey for just buying GPS features if you discount the 3G data bit.

If you can bear the emotional wait, you'll likely do far better to wait for the price to drop -- you know it will -- and look out for the first wave of refurbished units that should hopefully appear within six months. If you're really set on upgrading, here are some reasons to "go legit" with AT&T:

  • You pay "only" $199 or $299 for the new unit and you can eBay the old unit for a good profit. You can even wipe the old phone as needed to protect your privacy. That $500 or so extra can offset the contract price difference between your current iPhone plan and the new more expensive 3G plan.
  • Likely as not, you can roll over your balance from your current iPhone or other AT&T plan, giving you a nice minutes nestegg.
  • Sure, the new phone plans are more expensive than what current customers are paying but you do get that 3G connectivity. That difference in unbearable EDGE slowness to actual 3G usability may make the difference in getting your work done or not, especially when you want to untether yourself from the office, stick the Internet into your pockets and go away with just the bare minimum of computing to connect you to the real world.
  • You get all the AT&T and Apple warranty plan goodness for that money. Sure, it's going to cost about $2000 for the two years, but you get a lot of value for that money for a price that's not that much different from buying a computer -- plus you get phone calls and internet thrown in.

I was really hoping that AT&T/Apple would sell the iPhone 3G contract-free for about $400. That they're coming in instead at $600, or about 50% more than my original guess, is disappointing. Were you planning to buy a contract-free unit on the 11th? How has the pricing affected your decision? Let us know in the comments.

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