iPhone 3GS

At last the rumours have been squashed with the official announcement yesterday of the new iPhone at the WWDC. No one can claim that this was not a big announcement. From 6 o’clock onwards yesterday all the trends on Twitter were related to the WWDC. The new iPhone 3.0 software was not the big announcement, we heard all about that back in March, we all wanted to kow about a new phone.

When it was announced, many were left feeling the new iPhone 3GS does not represent a huge leap, but rather a small step for the evolution of the iPhone. Apple announced that the new model will have a faster processor, which will allow most apps to run twice as fast, faster 3G of up to 7.2MBS, a new 3.2 megapixel camera with auto-focus and capable of video recording, voice control, better battery life, a built in compass, and an option of 16GB or 30GB. As our young Apple robot Nelson shows below.

However, what Nelson doesn’t make quite so clear is that a lot of the new features of the 3GS are also available just with the free software upgrade. On the software upgrade, available June 17, you will get cut, copy and paste, MMS, voice memo, spotlight search, landscape keyboard, internet tethering (using the phone as a modem, something that O2 will charge an extra £15 a month for 3 GBs as The Times have exposed), and a host of other upgrades as Apple themselves detail.

What seems more important to me is whether the price of an upgrade or new handset really represents value for money for customers, given that you are essentially paying for a few hardware upgrades. This is especially true given the handset pricing which O2 have announced:

18 Months 24 Months
Tariff £29.38 £34.26 £44.05 £73.41 £34.26 £44.05 £73.41
iPhone 3G 8GB £96.89 £96.89 Free Free Free Free Free
iPhone 3G S 16GB £184.98 £184.98 £87.11 Free £87.11 Free Free
iPhone 3G S 32GB £274.23 £274.23 £175.19 £96.89 £175.19 £96.89 Free
UK Minutes 75 600 1200 3000 600 1200 3000
UK Messages 125 500 500 500 500 500 500
Unlimited UK Data and Wi-Fi Yes Yes Yes Yes Yes Yes Yes

*Note all prices seem to be before VAT.

As the table shows just buying an iPhone with a new contract will cost a fortune. The charge just for the handset itself is bigger than any phone I can remember (with notable exceptions of luxury handsets such as the Nokia 8600 range). Things get worse for those looking to upgrade as they would have to buy themselves out of their remaining commitment, that is monthly charge x months left on the contract, e.g. £35 x 12 months= £420.

So all in all, very pricey. Especially for what must be the core market of those that already have iPhones. I would be particularly reluctant to upgrade given that Apple appear to be releasing upgrades annually, so I wouldn’t want to pay so much to get a new handset, be tied in for 18 months and then find a new handset out in a years time. This argument has already been put forward on the site Techcrunch. While it refers more to America the same principals apply to the UK. Especially as we are not sure how long O2’s exclusive agreement with Apple will last. It would be annoying t0 pay so much for an upgrade only to find that the exclusive agreement ends in January 2010.

Many are pointing out that there is no reason that iPhone customers should get special treatment. If I had a Samsung handset and a new model was released, I wouldn’t get a discount to get the new model. While this is true I think it is slightly missing the point. Most iPhone customers are big spend customers, they have to be given contracts only start at £35 a month. Many are much higher than that. So if O2 were to subsidize the handset for upgrades they would quickly make the money back. Essentially it seems a bit short-sighted of O2, they seem to be thinking about money now, rather than bigger money long term. On top of this point O2 would never dream of charging £299 up front for a Nokia N97. They would certainly subsidize the hardware cost knowing they would make their money on the contract itself.

The charge for the iPhone itself is also a lot higher in the UK than over in America. The charges for the 3GS will be $199 for the 16GB and $299 for the 32GB, while in the UK we will be charged the same amount in pounds! (As stated the prices in the table are before VAT so add the VAT and….).

These are just my thoughts. I am certain that many people will rush out to get a iPhone 3GS, and I don’t blame them at all, it does look fantastic. What I question is whether it really represents good value for money given the limited hardware upgrades are arriving with software upgrades that will be free for current iPhone 3G owners.

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