It's not free at all if you have to sign a contract. When obtaining a phone under contract I always consider the total cost of ownership (which is conveniently written into the contract where I live at least). So if you're paying $50[1] a month over 24 months then the total cost is really $1,200. Then I consider if it's really worth skimping on $300 (25% in this case) upfront then not having a better phone. Or I might compare it to the cost of buying a phone outright and how much I'm likely to spend over the next 24 months on a non-contract plan.
[1] Prices are not actual, but are close to what I recall when I last signed up on a contract.
Yes and no. Often (almost always?) the price per month would be $50 whether you take a free phone or use your old one. Cash grab by the networks of course, but still. The different is contract length- if you want a phone it's two years or more. But if you intend on having cell service for the next two years (and who doesn't?) it doesn't seem like such a big factor.
To get the iPhone 3GS for 1€ from Deutsche Telekom you have to sign their 60€ contract for 24 months. That’s 1,440€. The same contract costs 50€ without a phone, that’s 1,200€ for 24 months or 240€ less.
It’s not really worth it buying the 3GS new and unlocked from Apple (if you want that specific contract) since they want 370€ from you. It usually never is worth it, no matter the carrier. (That is, if those carriers offer a subsidized iPhone. Some MVNOs don’t, but you might still get away cheaper by picking a MVNO and buying the unlocked phone. MVNOs are often cheap and might have contracts that fit your needs better.)
But there is always a difference in price between getting a contract with phone and one without. Some carriers don’t add to the price of the contract but let you pay for the phone in installments. In practice, though, that’s a small difference. (The nice thing about paying in installments is that the installments automatically stop. Your contract will cost you the same increased price, even after 24 months. You have to manually intervene if you want to pay less.)
What you definitely should never do is buy your phone based on the subsidized price. That just makes no sense. You always have to consider the whole package. Deutsche Telekom offers a 20€ contract (30 minutes for outgoing calls, unlimited incoming calls, 0.19€ per SMS, unlimited data, throttled to GPRS speeds when you are over 300MB) and if that’s all you need you have to pay 480€ for two years of contract and 200€ for the 3GS. That’s less than half of the 1,440€ for the 1€ 3GS.
(I’m sorry, I’m currently researching phone contracts for my sister so I have all this crap stuck in my head.)
I just did some quick research. Neither AT&T nor Verizon offer lower rates for bringing your own phone, T-Mobile offers a $20/month discount between month-to-month/BYO phone and contract plans, and I couldn't find anything on Sprint's site about prepaid options (I believe Sprint tries to steer its prepaid customers to it's Boost Mobile subsidiary).
As other commenters have mentioned, this is usually not the case outside the US. For example, Vodafone UK offers both different plan prices AND handset prices depending on length of contract.
As an example of the power of "free*", my mom went to buy one of her employees an iPhone and told me in amazement how it was the first time she walked out of an AT&T store without spending a dime. I'm sure I'm not the only one she's told the story to, and I don't think she was as excited about the time when she bought my grandmother a $50 3GS just a few months ago.
Here's another comparison. Sprint doesn't offer the iPhone 3GS, but assume it did for $0. Their unlimited service plan is $99/month. So to own the phone for 2 years would be about $2400.
In comparison, let's say you get a Samsung Android phone from Boost Mobile (which uses Sprint's network). That costs $150. But Boost's monthly unlimited plan is $55/month. So the plan cost over 2 years would be $1320. Add the phone and you're at $1470. So going the Android route on the same network would be $930 cheaper.
Rubbish. Most networks have a special contract specifically for iphone users who get a phone. It costs a small fortune more than the contract for other phones. You can also buy a simcard only contract that includes no phone - again, cheaper.
I just looked at Telstra's plans for iPhone in Australia and you can get the base model iPhone 4S for $63 a month or the 64GB model for $72 a month. An Android phone will cost you at least $59 a month on a contract but there are also handset repayments involved. Granted this is our more expensive carrier but the only one you can really rely on for coverage outside the main cities.
That's not the point of the article... the "non-free" Android phones are also under contract! That $150 Android phone would otherwise cost you $400 or more.
I'm not sure about the providers in the US, but comparing a "free with contract" iPhone 3GS to a $150 Android phone with contract is ludicrous.
I can get a Samsung Galaxy S2 right now, for $99 and a contract. That thing will run circles around that old iPhone. This is a marketing ploy, nothing more. Is it any wonder the global economy is in shambles when people can't determine what's free and what is "free"?
I guess people aren't able to do enough arithmetic to figure out that the monthly bill over the lifetime of a two-year contract swamps the $200 you have to pay upfront for a far more capable device. Caveat emptor.
As an iOS dev I'm a little sad that I'm going to have to keep that low a common denominator in mind for the next few years though.
That's not necessarily the case. $200 is still $200. They pay the contract regardless. The same argument could be made about only getting the high end 64GB iPhone since $399 is a drop in the bucket compared to your contract.
Or cable boxes. I assume that you have a top of the line TiVO rather than using what the cable company offers? Cause the upfront cost of the TiVo box is dwarfed by your long term cable bill.
It looks like the absolute minimum you're going to spend on a 2 year contract is about $1300. You get tremendous bang for your buck for the extra 15% (or much less) a new iPhone 4S will cost you.
I've never thought cable was worth the money so I can't say if a similar logic applies there.
That's not really true. I'm on Rogers here in Canada. Pre-paid used to give you some limited data connectivity, but they removed the option, and left it for dumb phones only. If you want to use a smartphone on pre-paid there is no way to add monthly data. The only option they offer is a $4 per DAY special data package. So I have to get a contract.
My 3GS is still running fine, altho slowly with iOS5. It will last me until the iPhone 5.
I write cpu-intensive audio apps. The difference in performance between 3GS-level devices and the newer models is big enough to require some serious architectural differences in my code.
Without sounding like a snob, I would hesitantly suggest that those people who held out for a free iPhone 3gs are less likely to go spending a huge amount of money in the AppStore.
These have been around in England as well for at least the last month or so - "free iphone 3GS for just $15/month". I find it incredibly oxymoronic and hence annoying, and I'd really like to see them told to change their language. "Free iphone with a $15/month 2-year contract" would be a lot less misleading...
In Finland the carriers are forced, by law, to tell you what to the total cost for the contract will be over it's lifespan. They also have to tell you how much of that total cost is for the phone.
When I hear people talk about wanting an iPhone, I hear them talk about how they'll use it, not about the fashion aspect. I mean, no doubt some people want it as a status symbol, but it's not at all clear to me that that's "why people want an iPhone".
In my opinion it's the Android market that's fashion-driven. They are constantly releasing new models, which usually don't get the latest software updates, and are usually differentiated by cosmetic differences or software skins.
The iPhone 3GS is still a very capable device anyway.
There's a huge market out there of people who don't really care that much about what the phone is (and so we have the wall of phones at every phone store). They'll definitely consider the 3GS on cost alone, and the fact that it's an Apple can't hurt.
[1] Prices are not actual, but are close to what I recall when I last signed up on a contract.