iPhone 3G: everything you ever wanted to know (but were afraid to ask)

Filed under: Cellphones

If you're anything like us, just about everyone in your family has called you up this week to ask if you think they should get the iPhone 3G; it really doesn't help matters that there's just an absurd amount of (mis)information floating around about it right now, too. So this one's for you and your fam -- we're dishing out the straight dope on iPhone 3G, a to z, so feel free to pass it on.

So, what's with the new iPhone 3G?

Well, it's pretty much the same iPhone as before -- except now it's down to $200, and has way faster 3G data, A-GPS (which is even better than regular GPS), as well as a flush headphone jack (which is great for anyone who doesn't want to use Apple's bundled headphones). Oh, and it's also a little thinner around the edges, and a little thicker at the center. If you want to know what it was like to try out, check out our iPhone 3G hands-on.

How'd they get the price so low? The iPhone used to be crazy expensive.

Actually, depending on how you do the math it's not actually cheaper. Now, in some countries the iPhone is free when you sign up for service, and in the US you'll pay $200 for the 8GB model -- half what it was a month ago -- so you're definitely paying less up front. But the data plans cost more now, so you might wind up spending more money over the long run.

Um, ok.

Look, gadgets only get cheaper as time goes on, and Apple's sold enough iPhones to continue to lower their cost to manufacture each unit. But more importantly, Apple's re-arranged its business deals to get carrier subsidies. Basically, what that means for Apple is they've decided to stop asking their carrier-partners for a cut of your monthly service fees. In exchange, the carriers have agreed to pay a significant chunk of the cost of your new iPhone 3G in order to get you to sign up.

So everybody supposedly wins: Apple sells more devices and still makes good money, AT&T gets more subscribers, and you get a cheaper iPhone. But there is a financial toll to this: AT&T estimates that helping you pay for your new iPhone will actually cost them $600 million through 2010. But clearly the numbers indicate that the short term cost will be worth it for them the long run.

Does that mean Apple doesn't make as much money per phone?

For all we know Apple might actually be making more money per phone now. With the original iPhone 3G, you paid "full price" for an iPhone -- $600 at its high point. Now you'll be paying no more than $200 (and as little as nothing in some countries) for the 8GB model, so we don't really know exactly how much of Apple's price the carriers are knocking off. We think it's fair to assume it'd still be in the $400-450 retail range, though, if it wasn't subsidied. Which it is.

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