Editorial: iPhone Prepaid is Old News… And I’m Signed Up

There’s been a lot of buzz lately about Apple’s iPhone going prepaid. I’ll explain why this is mostly drive-by media coverage, why it’s not new, and why it’s something you should consider.

Read more to get all the nifty details…

First, let’s clear up one thing that’s been bugging me. AT&T documents back in January confirmed iPhone would be out on prepaid. That’s why we haven’t reported on it. It’s old news, and just because some corporate terminal prints out a SKU doesn’t change that AT&T said all along iPhone would be on prepaid. Sorry, it gets on my nerves when old news gets re-hashed. But, rather than have this be an editorial on media/blog relations, I’ve decided to use this editorial to turn my focus on things you actually are interested in… real analysis

But, before that, let’s get our facts straight; all AT&T Cingular devices have been available on prepaid. It’s been that way since AT&T Wireless and Cingular merged in 2003. iPhone is no different, and quite frankly, the way AT&T sells phones makes it impossible to prevent prepaid sales.

Now, many have raised the question of “why would anyone want a prepaid iPhone?” I’ll answer why there are several good answers.

GoPhone for iPhone

AT&T’s prepaid service, GoPhone, comes in two offerings, Pick your Plan, and Pay as You Go.

Remember, AT&T’s iPhone price without contract will likely cost $150 to $200 more than the quoted “with 2-year contract” pricing.

Pick Your Plan (PYP) is a rather straightforward answer to iPhone. It doesn’t require a contract, and it works just like a typical postpaid plan. AT&T offers unlimited data for $20/month (which is the same as postpaid, except you don’t get any bundled text messaging). Voice plans start at $30/month, meaning the cheapest PYP plan for voice and data comes in at $50/month. That’s pricey, but considering a postpaid plan starts at $60/month ($40/voice + $20/data), that’s a savings of $240 over the course of a two-year agreement.

In other words, if you’re primarily using iPhone for web surfing, messaging, essentially as a secondary phone, it’s cheaper. If you’re on-contract with another carrier, that’s an attractive option.

Pay As You Go (PAYG) is a bit more complicated. It bills at $.25/minute (or $.10/minute if you change to the $1/day usage plan). Data is billed at a whopping $.01/KB. That’s not very good news for iPhone, but it’s not terrible news either.

With Wi-Fi, iPhone is still an attractive option, even with expensive per-minute and per-kilobyte rates. iPhone can be sold as an internet device for at home, with chat and text messaging at reasonable prices. And, with built-in iPod and Sync functionalities on PC and Mac… iPhone has all the uses of an iPod while mobile without any additional cost. For people who want less gadget hassle in their lives, a prepaid iPhone is an attractive option for replacing an iPod.

A Third Option: iPhone-centric Prepaid Plan

I really hope AT&T rolls out a data-centric plan. And, they appear to be poised to do so. Offer users who already have a phone on another carrier a plan that caters to iPhone’s services. T-Mobile offers a Sidekick Prepaid plan, and I think it would be in AT&T’s interest to offer a dedicated iPhone prepaid plan.

Such a plan would probably peg in at $24.99 to $29.99 a month, and include unlimited data, 100-200 SMS messages, and no voice minutes. Voice minutes would then be billed as the Pay As You Go rate of $.25 minute. This way, AT&T can sell iPhone to folks that already have a voice phone.

But, best of all, AT&T lures customers in, so they can lock them in with a contract later. Get the iPhones, make them an essential part of their day. When their voice contracts run out, they’ll simply port their number over, and convert their iPhone to a regular plan.

Yes, iPhones will sell on Prepaid

Granted, iPhone prepaid sales will be a minority. However, I suspect it will be a significant minority, especially if AT&T uses a new data-centric prepaid plan to attract potential switchers.

I will be getting an iPhone on prepaid. Why? Sprint SERO is $29.99/month, offers 500 anytime minutes, free roaming, free data, and unlimited messaging. In short, Sprint offers the same plan as Cingular for less than half the price. That’s a savings of over $360/year. That’s $720 over the course of a two-year contract with AT&T.

Not to mention I never go anywhere without GPS. iPhone doesn’t have GPS, Sprint has Sprint Navigator. I have an old 3G iPod whose battery is finally giving out. I’d either need to buy an iPhone, or get a new iPod. With Wi-Fi, and the potential to wirelessly access my iTunes (which I presume will be how Apple works around the storage problem when at home), I’ll be getting my money’s worth even with limited cell phone usage. Not to mention the potential for it to be the first iPod with A2DP Stereo Bluetooth…

What can I do with that $720 saved? I can get an iPhone on prepaid (let’s say for the moment it starts at $650/4GB without contract). Sure, this means I probably won’t be surfing Safari down every street, but Widgets allow for quick web info at only the cost of a few cents. And, of course, you can turn images off in Safari to save even more money (I remember asking a particular Steve for that feature years ago… he promised it was in the app).

In short, I advise those that are technically inclined, and want an iPhone, to consider pocketing some cash, and carrying around a Sprint SERO phone alongside a prepaid iPhone… you’ll save money and have much more wireless service at your calling.

Note: I was reminded in the comments that many don’t know that SERO requires you to enter the “password” savings@sprint.com as the email address. However, it is open to all new customers who want a great deal on Sprint service.

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