Apple [AAPL]’s campaign for the iPhone 3G is “Twice as fast. Half the Price.” Both claims should come with caveats. While the symmetry of the slogan is nice, Apple’s so-far-successful attempt to market the iPhone 3G to more mainstream users is, to some, less-than-truthful. Apple’s ad fails to tell the full story about pricing or the


First the price. The phone itself is indeed “half the price.” For most. Prices start at $199 for the 8GB model for new and upgrade-eligible AT&T customers, $399 for AT&T [ATT] customers who are not upgrade-eligible. The 16GB model is $299 for new and upgrade-eligible AT&T customers; $499 for non upgrade-eligible AT&T customers. You need to sign a two-year plan at activation – that’s why you need to do it in the store.

Sure, the actual phone is cheaper to purchase, but the mandatory two-year plan is more expensive, ranging from $69.99 per month for 450 anytime minutes and 5,000 night-and weekend-minutes, to $129.99 per month for unlimited anytime minutes. SMS is not included in the plan, so customers will pay $5-$20 per month for text messages ($.20 per text if you don’t have a plan.)

Even without texting, the 3G costs $10 per month more than the old version.

Then there are the miscellaneous charges: “Readers should also be aware of miscellaneous usages charges, taxes and fees that are tacked on to wireless bills each month. For instance, these charges added nearly $20 in June to an individual AT&T account in New York that was subscribed to the $109/1350 minute iPhone plan,” AppleInsider says. did the calculations and found that the new iPhone would end up costing $160 more than the original at the end of a two-year contract. This isn’t really a significant increase – $6 a month – but part of the appeal of the 3G was its supposedly lower prices. GPS capability and faster internet for people in a 3G zone might make up for the price hike, and, while it seems most people know about the contract costs, there’s bound to be some people who actually are expecting a cheaper overall experience. It would be different if iPhones could be used on multiple carriers. But buyers are essentially snared in AT&T’s two-year contract from the get-go.

AT&T will also sell unlocked 3Gs for $600-$700 for those who don’t want a two-year contract, but AT&T will still require customers buy some kind of plan for pre-paid phones. So even if you buy an unlocked phone, you’ll still have to buy some kind of contract, which will probably be more expensive than the two-year deal. Even if you cancel the plan, it’ll still cost you. And when you switch to a different carrier (Verizon or Sprint, the only others that have 3G capacity at the moment; T-Mobile says its own is coming soon), plan on paying the same or more for a phone + data plan.

While to most “3G” is nothing more than a tech-sigil we’re so used to because companies use them all the time (after putting two words together without a space in a techy way, as they will surely do in the future), it actually refers to the third-generation broadband network that makes the iPhone so fast. For the lucky cities that have 3G access.

AT&T’s 3G coverage is pretty limited (see list of Cities Supporting AT&T 3G/Mobile Broadband), available in around 350 U.S. cities. Ten states don’t even have 3G. Most people probably don’t even know what 3G means, so it’s wholly possible that many people will buy the iPhone exclusively for its “twice the speed,” while having access to the network that ensure the speed. People outside of AT&T 3G zones will be essentially be wasting their money (unless having a GPS is worth anything to them.) Verizon and Sprint’s 3G coverage is just as limited.

If you’re outside a 3G zone, you’re getting the same speed as the original iPhone. But at with the limited GPS, you’ll know where you are.

Of course, for some people, the price is nothing compared to the social cachet of owning a 3G; for others, the increased functionality is worth the price. Apple’s taking the same road as the mac – the iPhone’s not just a gadget, it’s also a style.

By Mark Alvarez