Should You Spring for an iPhone 3G S?

Craving the new iPhone 3G S? Apple's (Nasdaq: AAPL) newest baby will be faster than ever and offer yet more functionality. If you are already an iPhone 3G devotee, the upgrade will likely cost you US$399. If you've been cannily waiting in the wings for the last few years -- expecting that Apple would continue to upgrade its mobile device while dropping the price -- it will cost you a mere $199 or $299, depending on the version you choose. That is, of course, if you opt for a two-year service contract with AT&T (NYSE: T). Without it, get ready to plunk down an additional $400.

iPhone owners can, of course, pay the contract cancellation fee of $175 and start up again with a new contract and subsidized phone. A little simple math, though, shows savings would be minimal.

Apple has never been known for coddling its customers -- other than by giving them high-end devices, of course -- but the discrepancy between what newbies will have to pay to get their hands on the new model versus what loyal customers will have to pay is fueling numerous rants in the blogosphere.

These price points were likely not set in Cupertino. It is AT&T, the iPhone's sole U.S. carrier, whose two-year service contract must be abandoned for the new device -- and AT&T, in fact, is the focal point of customers' ire. Basically, the problem is this: AT&T is not going to provide an upgraded handset to existing customers at a subsidized price unless the customer's contract is near its end.

Questioning Contract Terms

There is a lot to justify anger with AT&T, but its contract terms shouldn't be on that list, Rob Walch, host of Today in iPhone, told MacNewsWorld.

"These are the terms of the contract you signed," he reminds miffed customers.

If AT&T makes any kind of change, it should be to offer a subsidized phone only with an extended contract, he suggested.

Sooner or later, Apple is going to ink an agreement with Verizon to distribute the iPhone, and it would be in AT&T's interests to have as many customers locked in as possible, he said.

Such rational thinking is not persuasive to legions of irate 3G users, however. For them, the question will come down to whether it's worthwhile to make the switch and, depending on how mad they are at AT&T, how long they can hold out before jumping to another vendor.

Questioning Functionality

So, what extras will the 3G S provide to take some of the sting out of the price tag?

It will boast extra speed, and it will have a built-in compass, as well as video recording and voice control software.

It will also come with the next operating system upgrade preloaded. However, that upgrade will be available to all iPhone models, not just the 3G S.

iPhone OS 3.0 will be an important upgrade, especially for business users, Patrick Gilbert, CEO of 4SmartPhone, told MacNewsWorld.

"There are a lot of new features that make a huge difference in terms of usability," he said.

These include enhanced search and the much anticipated cut-and-paste functionality, which Walch said "works beautifully."

The OS upgrade also includes much-anticipated tethering and multimedia messaging service capabilities -- and therein lies the biggest iPhone disappointment, according to Walch. Those features won't be immediately operational, due to AT&T's inability to support them.

Although tethering and MMS are already available on iPhones in some parts of the world, they won't be functioning when the 3G S launches in the U.S., "thanks to AT&T's ineptitude," said Walch.

Should 3G Owners Make Do?

The compass is part of the iPhone 3G S hardware, Walch pointed out. However, the video recording and voice control capabilities the new model will offer can already be had on the iPhone 3G -- for those who are willing to jailbreak their phones.

In fact, a number of existing applications let users of jailbroken iPhones get extra functionality, noted Walch, including the iPhone Modem for tethering and Cycorder for video recording. Quik is another app that allows users to record and upload video to the Internet.

Bottom line, according to Walch: If you are an iPhone 3G owner, either jailbreak it or wait out your contract -- unless extra speed and a compass are very important to your operations.

A casual user should be able to get by with the software upgrade without spending the additional money to acquire the new hardware, echoed Gilbert.

Business users, though, would probably opt to upgrade to the 3G S for its speed, he said. "I am not saying the current version lacks anything in the performance category, but when you are on the road for business, anything that is twice as fast is always twice as good."