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iPhone 3G owners and AT&T upgrade woes

Michael Jones

With the introduction of the new iPhone 3G S at WWDC, existing AT&T customers who wish to upgrade to the new model are quickly finding out that they are not eligible for the pricing announced today.

If you were among the first 10 million customers to pick up the original iPhone, and you have not upgraded to the 3G, chances are your AT&T account lists your iPhone as eligible for an upgrade. But for many users, this is sadly not the case. Several readers have written in, letting us know that AT&T is not offering upgrade pricing for existing iPhone 3G owners, and is asking $599 for the new 16GB 3G S, or $699 for the 32GB model. Others have things a little easier, with AT&T offering $399 or $499 upgrade pricing. Now that's definitely not the rosy picture that was painted on the slide at WWDC this morning, is it?

So what can you do if you want to upgrade? Well, you might have a few options. For starters, the typical contract cancellation fee is $175. So, depending on your plan, you may be able to save some money by just canceling the contract, then purchasing the iPhone as a new contract. Keep in mind, by doing this, you'll probably need to wait 90 days or so to sign-up with AT&T (in your name anyway) and you'll lose your existing phone number.

You might also want to consider adding a new iPhone as an additional line to your account. If you don't have a spouse or family member to share your existing iPhone 3G with, the additional monthly fees for the new iPhone 3G S probably won't end up saving you any money (in fact, you can pretty much guarantee it won't), but if you want a new iPhone and have a person you can share your existing iPhone 3G with, this might be an option.

Upgrade screen for an AT&T customer just a couple of months shy of the 18-month threshold.

Finally, you can always resort to the old standby method: subsidize the cost by selling your existing phone. Since the hardware changes are fairly minimal with the new model, it's a safe bet that the 3G will still be in good demand, at least for a little while. Chances are pretty good that you can recoup some, if not all, of the cost of the new phone by selling your old 3G after you have upgraded. This is particularly true for 3G phones that have been jailbroken or unlocked. Even though the 8GB iPhone 3G will be selling for $99, users who want to use a phone without a contract or potentially with another carrier are foaming at the mouth for the iPhone.

Keep in mind that these are just suggestions, and may or may not work for everyone in all cases. If all else fails, talk to someone at AT&T. You might just get lucky and find someone who is able to help you out. If you want to wait out your existing contract, it appears that AT&T will approve you for upgrade pricing 18 months into your contract. So if you got an iPhone 3G last June, you can look at upgrading to the iPhone 3G S at the end of December.

Will you be upgrading your iPhone 3G to a 3G S, despite the steep price, or will you wait until you are eligible to upgrade? Let us know in the comments!

Update: As many of you have pointed out in the comments, much of the reasoning behind this is due to the fact that the 3G iPhone's cost was subsidized, meaning that AT&T could sell you the phone for a lower price, while locking you into a two year contract and recouping the remainder of the phone's cost over the length of that contract. In contrast, the original iPhone's cost was not subsidized, which allowed more flexibliity to those wanting to upgrade their phones early.

In all fairness to AT&T, this is the same practice that is followed by most other carriers around the world. However, much of the confusion comes with the fact that many customers were allowed to upgrade to the 3G last year if they owned the original iPhone.

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