How much did a $200 iPhone cost Apple

As we celebrate the introduction of 3G to the Apple iPhone we need to allow ourselves to take the good with the bad. Unfortunately the way Apple got the price down to $199 for the 8GB phone harms the end users as well as the company. So lets take a look at the true cost of a $200 iPhone 3G.

1. No more activation though iTunes

The innovative way the original iPhone allowed users to activate, choose a service plan, and swap over an existing number though iTunes is no more. AT&T will now require that you activate your new iPhone during your purchase. Apple stores will be equipped with the ability to do the activation, but this is taking a step backwards in terms of how the iPhone innovated the mobile service. I you plan on camping out get ready to wait though the 10 – 15 minute activation time per customer before you get your iPhone out of the store.

2. No Online purchases

This is directly related to number one. Because AT&T now requires in store activation users cannot order iPhones online at or AT&Ts website. This will inconvenience and might even harm some potential iPhone users who might not be able to get to an AT&T or Apple Store.

3. Apple will loose revenue

So maybe if you don’t own Apple Stock you don’t care how much profit Apple makes. But there are those out there who are gambling their money on iPhone 3G being a huge success. Well, because of the deal that Apple has struck with AT&T they will no longer be getting money monthly from iPhone customers. Instead that money will be going to pay off the hardware and pass the savings onto the consumer. A good thing for the consumer, but Apple making more profit also means that they are able to do more innovative things with the iPhone. Including how much weight they though behind the Application Store.

4. Penalties for not activating your iPhone

For collectors out there who might want to add a iPhone 3G to your ever growing collection of unopened shiny apple products or grandparents who want to put a phone away for your grandchild to open on Christmas day, you are out of luck. If you do not activate your phone with AT&T within thirty days you will be subject to some sort of penalty. What that penalty is hasn’t been decided yet. But Reuters is reporting this after talking to AT&T.

5. Increased monthly cost

AT&T will increase the price for unlimited iPhone data plans by $10 when you upgrade to a 3G model. This increases the cheapest individual iPhone plan to $70.

6. Apple charging for future updates

According to Apple the reason they are forced to charge iPod Touch customers for updates, but not iPhone users, is that it’s an accounting…. thing. Gaining a monthly revenue from iPhone customers gives them the ability to add features to the device for free. Now that they are no longer getting monthly checks from AT&T free iPhone software revisions might be a thing of the past.

Getting the hardware down to the $199 price point has put Apple at the mercy of AT&T. A year ago it was Apple who was giving the orders. This change must have come after all the lost revenue AT&T suffered from unlockers who purchased iPhones and activated them with other providers or just smuggled them out of the country. Apple customers now have no choice but to stay with AT&T. Some people who get good AT&T service will be fine with this, those who do not are going to be very bitter. These factors aren’t a deal breaker for me. But they are evidence that Apple has bent over backwards dealing with AT&T to get what they wanted. With as little as four years of exclusivity remaining I hope this deal works for the remaining arrangement. If it doesn’t then AT&T might take steps to hurt the consumer, and Apple, even more.

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