With last week’s announcement of the Iphone 2.0 (due to be released on July 11th), I was yet again pondering the thought of switching to the Iphone. The Iphone is very revolutionary for the smartphone market. The interface is amazing. The fact that almost anyone can actually use the features of the Iphone is amazing. Anybody with a Windows Mobile phone can attest to the difficulty you will have accomplishing seemingly normal things.

But, all in all, what is the real cost of switching to the Iphone?

As I sat in the mall yesterday with my family, I had about 10 minutes of downtime to myself. So, sitting in the Food Court, I broke out my Palm Treo powered by Windows Mobile. Try to view a regular webpage with Pocket Internet Explorer? Fail. Wanted to find a way to Twitter a photo? Fail. While trying, switching between running applications on the device is, well, failure. All in all, Windows Mobile just DEFINES what it means to be clunky and hard to use. Sure, I like the QWERTY keyboard, but the software isn’t good.

Well, the mall I was at happens to have an Apple store. So, my wife and I went in and checked out the Iphone. Comparatively, the Iphone is just a breeze to use. The screen quality is superior. It allows me to do things which I cannot do on my Palm Treo (or if I can, it is too damn hard to figure it out). The ultimate test is the wife test. I’m happy to report my wife figured things out pretty well. At one point, she showed ME how to do something on the Iphone. My wife isn’t exactly a techie. Far from it, in fact.

So, it is official. I want an Iphone and intend to switch. But, when and how much will it cost?

The True Cost

The new Iphone is going to debut at $199 for the 8 GB version and $299 for the 16 GB version. Now, these phones are probably easily $800+ devices. The only reason you’re getting it so cheap is because of the 2 year AT&T contract that you HAVE to use to take advantage of the phone.

When you go to buy any cell phone from a carrier, you get a steep discount on the phone when you get a contract with it. This is how the carrier makes their money. If you get no contract, you end up paying retail for the phone. Well, Apple isn’t selling the Iphone at retail. You can only get it at the cheaper rate, which means the phone is subsidized.

So, you not only have to use AT&T, you’re very likely going to HAVE to activate the phone with AT&T before you even leave the store with the new Iphone 3G. No more online activation. AT&T is also talking about enacting penalties if the user doesn’t activate the phone within the first 30 days.

The AT&T plans are reasonable. You pick any voice plan you want and then you’ll tack on an additional $30 for the data plan so that you can take advantage of the Iphone features.

Despite the reasonable plans, though, they sure to hustle you in there whether you like it or not.

But, Is the Phone The Only Cost?

If you have a contract with another carrier besides AT&T, expect to pay an early termination fee. I am currently with Alltel. My wife is also with Alltel and we have a family plan. Alltel will charge us $200 PER LINE to cancel our contract. That’s an additional $400 just to switch to AT&T.

What’s more: I didn’t even buy my wife’s phone from Alltel. So, it isn’t like they have costs of the phone to make up for. They’ve MADE their money with us. I’ve been with Alltel for several years now. The fact that they want to stiff me for $400 really rubs me the wrong way.

So, if I picked up an iPhone for my wife and I, that will be $400 for the two phones. An additional $400 to get out of Alltel and we’re looking at a total cost of $800 – BEFORE my first month bill from AT&T.

The War Over Early Termination Fees

There have been a number of lawsuits against wireless carriers for their termination fees. A lot of people have been in an uproar about it. So much so that that there is a bill in front of Congress called the Cell Phone Consumer Empowerment Act of 2007. The bill wouldn’t get rid of termination fees, but it would reduce them. The bill says:

Requires that early termination fees be prorated over the term of a wireless subscriber’s contract in a way that reasonably links the fee to recovery of the cost of the device or other legitimate business expenses.

This would serve to make the fees more reasonable and would tie to the term of the contract which has been fulfilled. AT&T has proactively announced that they will do pro-rated ETFs. Verizon submitted a proposal to the FCC to allow consumers to cancel wireless contracts without ETFs and to prorate fees. Verizon’s proposal wasn’t altruistic, though. They want the FCC to stop the lawsuits. Other speculate that AT&T and Verizon are only doing this because they know they’ll be more likely to benefit as people defect from other carriers.

Unfortunately, the Congressional bill looks to be completely stalled (what else is new, right?).

Let’s Simplify Wireless

Here is the official proposal of David Risley (that’s me):

1. People buy the phone they want at retail cost (no subsidy)
2. People can pick and choose any carrier they want.
3. No contracts. You pay month-to-month, and if you want to switch, you do so.
4. If this invites people who switch all the time and this is a lot of cost to the carrier, charge a small fee to transfer the phone number.

But, the key here is no contracts. Then, even if Apple ties something like the Iphone to one carrier, people are free to make the move if they want to.

In the meantime, I am left pondering whether to (a) wait until April 2009 when my contract expires, (b) reduce Alltel down to some paltry sum and pay it until the contract is out while also paying AT&T, (c) bite the $800 and switch us both.

There is certainly little freedom in this business.

UPDATE 3:20 PM
Just spotted this blog post over on Gizmodo saying that you WILL be able to leave the store with an un-activated Iphone 3G but that you will need to sign an agreement promising to activate a 2-year AT&T contract within 30 days. My response? Heheheehehhe.

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