iPhone 3G: Is $199 a deal?

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After months of rumors and speculation, Apple’s highly coveted iPhone is getting a makeover. Starting July 11, consumers will be able to purchase the new iPhone 3G for $199 in 8GB, one-third the cost of what first-generation model originally sold for. (A 16GB model is also available for $299, a $200 drop from the old one.) These phones will not only access the Internet at faster speeds using AT&T’s 3G network, but they’ll also come with built-in GPS and a slew of new apps via Apple’s iPhone 2.0 software update. If ever there was a time to buy an iPhone, now is definitely it.

But, despite having a lower price than its predecessor, is the cheaper iPhone 3G really a deal? Below are a few factors you should consider before buying the new iPhone.

• AT&T has quietly raised the price on its unlimited data plan for the iPhone 3G. Unlimited data now goes for $30/month, an increase of $10. Factor in your monthly voice plan, which starts at $39.99/month for 450 minutes, and you’re paying a minimum of $69.99/month. That’s not horrible, but since you’re locked in for two years, that’s a grand total of about $1,855.
• The iPhone 3G can’t be bought online. AT&T is mandating that all iPhones be purchased in store, along with a $36 fee for activating your phone. (No more unlocking a phone without a service commitment.)
• Most cell phone service providers charge a cancellation fee if you terminate your contract prematurely. AT&T charges $175 if you terminate your contract after 30 days (there’s no penalty if you cancel within those first 30 days). Upon terminating your contract, customers must also return their phone. Assuming you buy the $199 model, at a minimum you’re now out $374. If you cancel, make sure it’s well within your first 30 days of service.
• Unless you’ve fulfilled your two-year contract with AT&T, current iPhone owners who want to upgrade to the 3G model must pay full price for the new model.
• Under the new agreement between Apple and AT&T, AT&T is no longer required to give Apple a cut of their revenue from iPhone sales. This means Apple is taking a pay cut with the new iPhone. It’s possible, although far from a given, that Apple might make this up by charging its customers for services that were previously free, such as software updates.