The Free iPhone 3G on O2
O2 has announced new tariffs to coincide with the release of the iPhone 3G on July 11th 2008. The advertisement for the new tariffs say:
“Best of all, the new 8GB iPhone won’t cost you a penny on our £45 and £75 tariffs. And it’s just £99 on our £35 tariff and new £30 tariff.
If you’d prefer the 16GB version, it’s free on our £75 tariff. Then you’ll just pay £59 with the £45 tariff and £159 on our £30 and £35 tariffs.”
Let’s compare the new tariffs as advertised on the O2 website:
With the exception of the £30/month tariff, the only difference between the contracts is the initial iPhone cost and the number of minutes included in the contract. I thought it would be worthwhile to analyse how the initial iPhone cost affected the total cost of ownership and I’ve decided to share my findings.
Before I jump into the analysis, let me state my assumptions.
- 18 months is equal to 548 days. Reasoning: if you consider each year to be 365 days long, 18 months is 547.5 days but I round up to 548 days for an 18 month contract because I imagine a cell phone network provider would want to squeeze the extra day of revenue from you.
- The total cost of ownership = a + (b * 18), where a = iPhone cost, and b = monthly contract cost.
- No consideration has been made for any additional costs.
8GB iPhone
Free
To receive a free 8GB iPhone, you need to agree to either a £45/month or £75/month contract for 18 months.
The TCO of the 8GB iPhone on the £45/month contract is £810 and includes 1200 minutes of talk time. This contract offers 39.45 minutes of talk time per day. The TCO on the £75/month contract is £1,350 and includes 3000 minutes of talk time. This contract offers 98.54 minutes of talk time per day.
Not Free
If you opt to pay for your 8GB iPhone, you need to agree to either a £30/month or £35/month contract for 18 months.
The TCO of the 8GB iPhone in this case is either £639 or £729. The £30/month contract includes 75 minutes of talk time, which offers 2.46 minutes of talk time per day. The £35/month contract includes 600 minutes, which offers 19.71 minutes of talk time per day.
However, if you choose a contract lasting longer than 12 months with 600 or more minutes of talk time, you are entitled to a free Bolt On. If you take the 200 Anytime Minutes Bolt On, you can upgrade the average number of talk time minutes per day.
16GB iPhone
Free
To receive a free 16GB iPhone, you need to agree to an 18 month contract at £75/month.
The TCO on this contract is £1,350 and includes 3000 minutes of talk time. As stated above, you get 98.54 minutes of talk time per day with this contract.
Not Free
If you opt to pay for your 16GB iPhone, you need to agree to either a £30/month, £35/month or £45/month contract.
The TCO of the 16GB iPhone in this case is either £699, £789, or £869. The £30/month contract offers 2.46 minutes per day of talk time, the £35/month contract offers 19.71 minutes of talk time per day, and the £45/month contract offers 45.99 minutes of talk time per day.
Tipping Points
A commenter worked out the value for money tipping points for talk time use on each offered contract:
If you use 100 minutes/month on the £30 contract, then the £30 contract is better value for money. If you use 630 minutes/month on the £35 contract, the £45 contract is better value for money. Finally, if you use 1,350 minutes/month on the £45 contract, the £75 contract is better value for money.
Graphs
This graph shows the TCO of the 8GB iPhone alongside average daily talk minutes.
This graph shows the TCO of the 16GB iPhone alongside average daily talk minutes.
(I couldn’t figure out how to set the secondary Y-axes title in OpenOffice 2.4. It is supposed to represent the number of daily talk time minutes included in a contract.)
Note: these graphs were updated on 9th July 2008 to add average messages/day data
Conclusion
If you believe you need the additional talk minutes included in the free-or-reduced price contracts, then the extra TCO may not be of concern to you. However, if you do not need the extra talk minutes then I recommend you spend either £99 or £159 upfront to reduce the TCO of your iPhone.
June 16th, 2008 at 11:36 pm
Great work!
Just to be extra annoying, you could also figure in the cost of taking one of the higher contracts and paying less to initially buy the phone, then downgrading after 9 months. I’ll be taking the £45 p/m 16GB option, then downgrading after 9 months to the £35 p/m, which according to my terrible calculations is a good idea.
June 17th, 2008 at 1:26 am
James, if I calculate correctly that will save you £10 if you actually time it correctly.
June 17th, 2008 at 1:44 am
James, doing that would only save you £10 over staying on the £35/m contract.
I’m a sad, sad nerd and have done all the calculations - I’ll be dropping down to the £30/m contract and saving myself £90.
June 17th, 2008 at 4:40 am
As with any other phone, buy the plan that fits your needs and usage habits. The marginal cost (monthly subscription) is more important than the fixed cost (phone price).
June 17th, 2008 at 6:02 am
[...] tej samej tematyce przeczytacie (po angielsku) na tym blogu szczegółową do bólu analizę kosztów iPhone i wersji 3G. Gizmodo ma podobną tabelkę [...]
June 17th, 2008 at 6:03 am
So - If you want to have an iPhone to look cool and attract chicks, all the while making no calls, get the one you pay for, but if _use_ is the reason you are buying the thing, go contract only!
June 17th, 2008 at 7:05 am
@beorning… I’ll be buying the iPhone to *use* — in fact, battery life may be an issue — I just won’t often use it as a ordinary telephone. I’ll be paying up front. For me, this device is a superior iPod Touch on which the browser will work even out of WiFi range. I currently carry with me every day 1) an iPod; 2) my Palm m515 for my calendar appointment alarms without which I couldn’t get through the day; and 3) a cheap phone I have to carry though I almost never use. Oh, and unfortunately, not even an iPhone is going to make me look cool or attract chicks. *sigh*
June 17th, 2008 at 9:12 am
Another thing to calculate (sorry, I’m too lazy ;) ) is how many minutes you have to talk on the cheaper contracts to match the cost of the more expensive ones. I could imagine that even if you use the phone for more than the included minutes, you might end up paying less with the cheaper contracts…
June 17th, 2008 at 10:09 am
In a recent version of the O2 website, it explicitly mentioned that the free bolt-ons were not available for iPhone tariffs. That language seems to have gone away, but I’m fairly certain that’s because they don’t want to discourage the £7.50/month up-sell they represent. I’m glad you didn’t include those minutes in your calculations.
June 17th, 2008 at 10:19 am
Thanks for this, it was very helpful.
I’m already on a £35/month contract with T-mobile and want to ditch this awful HTC thingy for a proper browser/phone/mail package. Plus, my other half is desperate to claim my iPod Touch for herself, and it will mean one less device to carry around when I’m on the move.
I think I’ll be paying for the 16Gig one, then taking a £35/month contract and I’ll see how it goes. I’ve invariably got a good chunk of minutes left over every month at the moment but I’m not sure how my usage will change - especially when I start to enjoy browsing on the move (instead of the pain I have to endure of Win/Mob 6).
From a battery life perspective, I’ll probably be fine though I do use my Touch a lot for music/video when I’m commuting. I think I’ll have to see how it goes; I’ll probably sprinkle a few mains chargers around the various key locations in my life, as I ended up doing with my Macbook Pro.
June 17th, 2008 at 11:49 am
Were there any reports of users getting better deals on the 2G iPhone? For instance, you’ve been with 02 for two years, can you keep your existing better-than-online deal and get a new iPhone? Or do you absolutely positively have to take a new contract?
June 17th, 2008 at 12:21 pm
I had a little play with some numbers and I’ve come up with some ‘tipping points’ for usage.
With the £30 plan you will need to use over ~100 minutes a month (over the 18 months) before the £35 plan is better value.
With the £35 plan you will need to use over ~630 minutes before the £45 plan is better.
With the £45 plan you will need to use over ~1350 minutes before the £75 plan is better (actually about ~1335 mins if you get the 16Gb).
Which means I’ll probably get the 16Gb on £35/month.
June 17th, 2008 at 12:35 pm
The contract prices are still very expensive. I’m keen on iPhone but think I might be in the market for O2’s “Pay and Go” SIM. However O2 has not published this price yet. The option might be good for people who like me don’t make many calls and will be within range of Wi-Fi networks at home and work for data use.
It will be great if O2 provide free access to the 9,500 Wi-Fi hotspots from their partners The Cloud and BT Openzone. However I suspect they will charge for this - no such thing as a free lunch.
June 17th, 2008 at 4:18 pm
Peter,
I’m pretty sure the wi-fi hotspots will indeed be free. (The Cloud is currently, and according to the website, they’re adding BT Openzone to the mix).
June 17th, 2008 at 6:53 pm
“In a recent version of the O2 website, it explicitly mentioned that the free bolt-ons were not available for iPhone tariffs.”
Indeed, I just phoned O2 to check, and the bolt-ons are a cost extra, because the iPhone already has 2 of them. Wifi and unlimited web browsing.
June 17th, 2008 at 9:56 pm
Great set of responses and further questions - it looks like most of the questions have already been answered.
Thanks to Llama for figuring out how much extra use you need before it is worthwhile getting a different contract, I’ll roll this into the blog as appropriate.
Adam and Drarok rightly pointed out that the Bolt-Ons might not be applicable and it’s good to know what O2 had to say. I’ll roll this into the blog too.
Rob Uttley, I’m glad you’ll find this useful.
Alex McLarty, I have no information on whether existing O2 iPhone contracts will be receiving a favourable deal.
June 18th, 2008 at 1:35 pm
you all have too much time on your hands.
July 7th, 2008 at 9:39 am
is it worth going for the business tariffs, any advantages, notice the contract lengths are longer.
i want 3 x i phones, for the family/business.
does the iphone 3g have bluetoth for connecting to the in car system ?
July 8th, 2008 at 8:52 pm
My advice to all…hang back from the maddening crowd and calmly await the gorgeous, utterly cool white iphone.
July 10th, 2008 at 2:09 pm
You know, I’d like it but it’s just too expensive! End of.
August 1st, 2008 at 9:49 am
Your forgot to include O2 treats ;) After 6 months you can get an extra 20 anytime mins free.
August 6th, 2008 at 5:34 pm
Can anyone absolutely confirm if by buying the iPhone (16gb on £35 tariff, I’m thinking) I would get free web browsing - i.e. data (not wifi) using GPRS (i think)?
Many thanks,
August 11th, 2008 at 2:43 pm
Phil
I don’t work for O2 but yes it’s free - buy it you won’t regret it; it’s worth it just for the light sabre!