Apple iPhone 3G, twice as fast, half the price

Apple announced the 3G iPhone on Monday, June 9 2008. I imagine the lawsuits will start by today, but, don’t quote me on it. If they don’t, they should- and Apple should be ashamed.

This isn’t the first iPhone price debacle, the first generation iPhone started out at $599, only to have the price cut by $200 less than 60 days after launch. Apple made it up (sort of) to early adopters by granting them a $100 credit at the Apple store.

This time, the part that’s missing from the small print is that Apple’s US partner in this, ATT, is going to require all 3G iPhone buyers to sign up for a new 2 year contract that is $10 more a month for the data plan that you have to have with the iPhone if you want to use all of its features. That works out to $240 extra- $40 more than you’d pay for the original iPhone with service. This iPhone might be $199 instead of $399, but, you will pay more monthly.

It’s not clear if ATT is offering the old “EDGE” or 2.5G price option to new 3G buyers or not. As a user of the original iPhone, I can tell you this:

ATT’s idea of “Internet access” via the “EDGE” network- is an absolute farce- my old carrier, Sprint- not only had faster access, but less dropped calls, and better coverage. Also, the visual voice mail on the phone only works when you have internet access- which means without EDGE or a WiFi connection- you can’t reliably easily retrieve your voice mail.

Apple still has other issues in this price change. The old iPhone hasn’t been readily available for months. If your 2.5G iPhone (still under warranty) has an accident (like mine did on Saturday night- slipping out of the holster into a bucket of ice water)- Apple is still charging $249 for a refurb, with no additional warranty:

Apple iPhone accident repair plan
This price- $249 to replace a phone that will soon be obsolete- and that can be purchased new on July 11 for $199 makes no sense. Apple’s pricing guru’s are asleep at the wheel on this.

It’s also sending a message to Apple’s customers that Apple really doesn’t care about taking care of it’s best customers- the early adopters.

Besides the “half the price” being a lie, Apple and ATT still haven’t learned the number one truth of the internet enabled consumer: pricing games are over; “There are no secrets. The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.” This was thesis 12 of the “Cluetrain Manifesto” published in 1999.

Subsidizing prices with subscription plans isn’t a viable way to build in hidden costs. Apple and ATT will have to learn this the hard way, which is really too bad, since they are probably reintroducing the greatest product in history- with features that will change the perception of what a phone can do as a computing platform- again.