The price cut that isn't: "Cheaper" iPhone, pricier data plan

AT&T raises its service price just as Apple cuts the cost of its phones.

Published June 9, 2008 10:05PM (EDT)

According to Apple CEO Steve Jobs, many people have held off buying the iPhone for one main reason -- it's too expensive.

In his speech at the Worldwide Developers Conference this morning, Jobs said that 56 percent of the people who've looked at, but decided not to buy, the iPhone cite price as their main concern. That's why, Jobs said, the company is making the device "more affordable" for everyone -- the new iPhone will sell at $199 rather than $399 for the low-end 8 GB model.

But in the United States, at least, the price cut will not make for a "more affordable" deal for customers. That's because the exclusive U.S. carrier for the iPhone, AT&T, plans to raise the price of its unlimited-data plan by $10, the company announced in a press release (spotted by Saul Hansell at the NYT).

Because AT&T will require iPhone customers to sign a two-year service contract, the $10-per-month price hike adds $240 to the full cost of a new iPhone. That is, AT&T's data-plan price hike exceeds Steve Jobs' $200 iPhone sticker-price cut.

Here's how the costs break down: For the old iPhone, AT&T's cheapest unlimited-data plan went for $59.99 a month. Over 24 months, that was $1,439.76. Add in the $399 price of the phone and you were looking at $1,838.76 for two years of iPhone fun.

AT&T's new unlimited-data plan goes for $69.99 ($30 for data and $39.99 for its cheapest voice plan). For two years, that's $1,679.76, and then you've got the $199 phone -- a grand total of $1,878.76 for the iPhone over two years. So much for more affordable.

To be sure, users are getting more under the new plan than they did with the old plan: Namely, they're getting to use AT&T's 3G data network, which is faster than the EDGE network that was compatible with the old iPhone. Hordes of folks -- me included -- are going to reason that the extra speed is worth $10 more per month.

But still, it's a price increase. If you found the old iPhone too expensive, don't be fooled into thinking the new one's any cheaper.

By Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society.

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