AT&T's iPhone 3G Service Plans Pricing Explained

Nine days and counting until the Apple iPhone 3G goes on sale in the U.S... Many plan on buying their first iPhone, while existing iPhone users ponder whether to upgrade to the new phone or not. Rumors and speculation abound as to how much AT&T will charge for its service plans and what features will come with those plans. We've taken it upon ourselves to address some of the rumors and issues below...

1) Rumor: AT&T will charge iPhone 3G customers more than it charges other AT&T non-iPhone customers.
False: AT&T offers four different individual calling plans for its phones, and the same rates and features apply to all of them, whether they are iPhones or not. The only difference is that the $30 per month data plan is already tacked onto to the iPhone 3G plan, where it is a $30 option for other AT&T phone plans.

The Family plans are also the same between iPhone and non-iPhone service plans. At first glance, the iPhone plans might seem significantly more expensive, but you need to take into account that the iPhone Family plans include two $30 data plans.

For the most part, non-pooled business voice plans cost the same as individual and family plans--there are a few more plan options available to business users. One big difference with business plans, however, is that data plans for any enterprise-type network application costs $45 per month instead of the normal $30.

2) Rumor: None of the individual plans include free text messaging.
True: If you want to use text messaging on your iPhone 3G, you will have to pay extra for that feature--it is not included as part of any of the individual plans. While this might seem like a way for AT&T to gouge more money out of iPhone users’ pockets, you won't be able to cry iPhone discrimination, as this is how AT&T does it for all of its current individual calling plans for all its phones.

If you don't opt for one of AT&T's text messaging plans, then you will pay $0.20 per message.

3) Rumor: All iPhone 3G buyers will have to pay a $36 activation fee.
Partly false: All customers new to AT&T will have to go through a credit check and fork over a $36 activation fee. Existing AT&T customers, however, who are upgrading to an iPhone 3G, have to pay only an $18 upgrade fee.

4) Rumor: AT&T will not have any pre-paid service plans for the iPhone 3G.
True: AT&T's exact wording is: "GoPhone Prepaid is not available for iPhone 3G at this time." (GoPhone is what AT&T calls its prepaid calling plans.) One could interpret AT&T's statement to mean that prepaid options might become available at a later date.

5) Rumor: There will be no surcharge to existing iPhone owners still under contract.
True: Regardless of how much time you have left on your current contract, you can upgrade from an iPhone to an iPhone 3G and need only pay the same $199 (8GB) or $299 (16GB) that everyone else is paying, and fork over the above-mentioned $18 upgrade fee. This of course, resets the clock on your two-year contract and leaves you with an old iPhone that can't actually be used as a phone anymore. 

CNET reports that recent purchasers of an iPhone have even a sweeter deal:

AT&T is giving people who bought their first-generation iPhone on or after May 27, 2008, the opportunity to exchange it before August 1. AT&T and Apple will refund the difference in price but iPhone 3G users will have to sign a new two-year contract and choose a new plan.

So if you do upgrade from an iPhone to an iPhone 3G, what does AT&T suggest you do with your old iPhone? "Hand it off to a friend or family member" so that they can open a new AT&T account with the phone. On the other hand, Apple Insider reports on another option for existing iPhone owners who will be upgrading to the iPhone 3G:

A spokesperson for the carrier confirmed to AppleInsider that neither AT&T nor Apple will prevent de-activated first-generation iPhones for serving as surrogate iPod touches. 

"If the [original] device is not re-activated as a wireless phone after you've upgraded to iPhone 3G, it will still work as an iTunes player and can access Wi-Fi," the spokesperson said. 

That means old iPhones can still surf the web, check email, and browse the mobile iTunes store when connected to WiFi. Additionally, they'll be able to function as a handheld gaming device and widescreen video iPod with calendar and photo functions.

6) Rumor: The iPhone 3G is less expensive that the original iPhone
Both true and false: How can it be both less and more expensive? There is no denying that the new physical phones cost less than their predecessors. However, since you purchase the phone with a now more expensive two-year contract, the total money you spend after two years works out to be more with the iPhone 3G than it was with the original iPhone. See our previous coverage here for a cost breakdown.