The biggest event to hit the consumer telecommunications industry in quite some time occurred last week as the much-hyped Apple iPhone was released to the general public. Listening to the often-breathless reviews from industry pundits, one could not be faulted for thinking that the iPhone can cook and clean house in addition to its myriad other features. Here at TRAC, however, we've seen numerous telecom gizmos come and go and we've found that most consumers want a simple device that does what they want and doesn't cost an arm and a leg. So how does the iPhone measure up and (more importantly) what are the ?gotcha's? that consumer should keep in mind before shelling out $499-$599 for the iPhone? Here are the big factors to keep in mind:
- The iPhone is exclusively available from AT&T (a.k.a. Cingular, a.k.a. AT&T Wireless) and will only be available to AT&T subscribers until at least 2009. This means that subscribers who want an iPhone but are currently under contract with other carriers will have to either pay for two wireless plans, break their existing service contract (and pay a hefty early termination fee), or wait for their contract to expire.
- iPhone service is significantly more expensive than conventional cell phone service. The cheapest iPhone service plan costs $59.98 per month for 450 minutes, unlimited data, visual voicemail, 200 SMS text messages, and 5,000 night and weekend minutes. By comparison, AT&T's conventional ?Nation 450 with Rollover? plan costs $39.99 per month for 450 anytime minutes and 5,000 night and weekend minutes.
- iPhone service requires a 2-year service contract. Early termination of the contract will cost $175. One has to wonder why there is an early termination fee at all. The normal excuse offered by carriers is that they are subsidizing the cost the phone. However, it is hard to make this case with regards to the iPhone. According to press reports, Apple is turning a profit of approximately $300 per phone. That may be one reason Apple's stock is soaring.
- When not operating over a Wi-Fi connection, the iPhone's data system currently operates over AT&T's EDGE network instead of the company's 3G network. Some analysts have called the connection ?excruciatingly slow,? taking more than 100 seconds to download the Yahoo! home page. The highest data speeds consumers should expect are around 200-220 kbps, which is about 1/3 the speed of a typical DSL connection. In other words, don't expect the iPhone to break any speed records downloading online content.
- AT&T's customer service ratings historically have not been the best. While the company has made strides as reflected in recent rankings from J.D. Power and others, they continue to lag behind industry leaders Verizon Wireless and T-Mobile. While Apple and AT&T have gone to great lengths to make setting up the iPhone as painless as possible, consumers should still consider the likelihood that they will have to interact with AT&T customer service at some point.
- Battery replacement will cost between $80 and $100. The iPhone battery is not easily replaceable, so the only option when faced with a dead battery is to send the iPhone back to Apple for replacement, which costs around $80.00. For an additional $20 they will send you a ?loaner? while your iPhone is ?in the shop.?
The final word: Customers who absolutely must have the iPhone will likely not be dissuaded from buying one by this article. Consumers who have a real need (and the pocketbook to pay for) unlimited data usage may find the iPhone quite useful. In addition, customers who are considering spending $249-$349 on a video iPod and who want a new cell phone as well could find that the iPhone's cost is more digestable. For the rest of our readers, however, it's hard to recommend the iPhone at this time. The high price tag for the device itself and the service is unlikely to come down until other wireless carriers begin to offer iPhone service. In addition, later versions of the iPhone are likely to include even more features and the capability to operate of faster 3G networks. For all these reasons, most consumers should probably hold off on rushing out to buy the iPhone right away.
Source: Telecommunications Research and Action Center. http://www.trac.org