More on iPhone TCO

Rubicon did an extensive survey of iPhone users. Their 35 page survey report is a good read on the loyalty and usage patterns of iPhone users. 

I used the survey to validate my previous 5 year iPhone TCO calculations I wrote about in January 

The survey says the average phone bill is $ 97 a month. The survey also says half the population sampled was 30 years or less, with 16% of them students. So a very different demographic from the traveling business mobile user - students and young adults have more access to home and campus Wi-FI, do not roam outside home city as extensively, do not travel internationally,but do text each other more - but let me come back to the business user. 

So if I reverse engineer their monthly phone bill on average they likely have the base 450 minute plan of $ 59.99 a month plus an add-on text messaging plan, or the 900 minute plan of $ 79.99 a month but no texting add-on. After taxes, this would pretty much use up their cited $ 97 a month. 

So just assuming that consumption pattern over 5 years let's do the numbers: 

· iPhone = $ 430 (including sales tax) 

· upgrade to next-gen 3G, likely GPS embedded device in 2009 say another = $ 430 

· 60 months at $ 97 a month (per above) 

· battery refreshes $ 500 (say 6 over 5 years plus shipping) 

· accessories $ 300 (say $ 60 a year after taxes) 

Total = rounded to $ 7,500 over 5 years 

Now let's adjust for the mobile sales person or regularly traveling business executive: 

· more minutes - with the new unlimited iPhone plan for $ 119.99 a month - so an additional $ 40 a month compared to above (Note: ATT has not yet move to unlimited minutes in its corporate plans. However many of its corporate plans allow pooling of minutes across employees). So, say another $ 2,700 after taxes over 5 years. 

· roaming Wi-Fi  plan if you travel fair bit in US and want better speed than current cell network = $ 1,300 ($ 20 a month for AT&T hotspot coverage plus taxes). You can do better with alternatives like Boingo. Also as 3G gets rolled out this may obviate the need for a roaming Wi-Fi add-on. So, reduce to $ 500 over 5 years. 

Total = $ 10,700 over 5 years 

For international travelers, the iPhone can be particularly TCO unfriendly given that you cannot legally unlock it and use a cheaper local SIM card. So if you are not careful you end up with calls of $ .99 per minute from western Europe to $ 2.99 a minute from India and as high as $ 4.99 a minute from Chad.Likely international charges: 

· international data roaming plan = $ 1,300 ($ 20 a month plus taxes for up to 20 meg in selected countries). More if you need an international hot spot plan. Say $ 1,300 over 5 years. 

· "discounted" international calling plan fee of $ 5.99 a month.  Conservatively, if we assume 2 international trips a year, and $ 100 in roaming calls per trip at the rates per minute above, you are looking at roughly $ 1,500 over the 5 year horizon. Of course, this could be much higher for more frequent travelers. 

Total = $ 13,500 over 5 years. 

In Europe add another 20 to 30% more based on currency and other price points Apple and its phone company partners (T-Mobile in Germany, O2 in UK) are driving. One advantage in Europe is the EU has capped roaming charges within Europe so international calling may be somewhat lower. Also, in Germany you can use the T-Mobile hotspot network for free.  So say another $ 3,500 over 5 years. 

European total = US $ 17,000 over 5 years

When I wrote the earlier note in January I got plenty of Apple fans commenting most of the cost elements would apply with any PDA. Not true. 

With a 3G PDA today you could remove or reduce the hotspot charge above. With an unlocked phone you could dramatically reduce your international cost exposure. On base plans in the US, Sprint today offers a $ 99.99 monthly package (Update: At the CTIA show this week, Sprint introduced the Samsung Instinct, an iPhone like PDA but with its faster EVDO network and GPS for $ 300 and its monthly package) which includes unlimited voice, data, text, GPS and lots more. If you just want voice, MetroPCS has  $ 35 a month plan. Do the math over 5 years and you can see the dramatic TCO impact of alternatives to today's iPhone/AT&T  (or iPhone/o2 in UK etc.) combination.

To which many Apple users will say "sure, but that's not an iPhone". 

To which I respond, go listen to Herb Cohen. What you should tell Apple and its exclusive carriers is " I care...but not that much". You can be Apple fan boys and fan girls and yet protest that the cost may end up being your 3rd biggest budget line item after your dwelling and your car. 

As for enterprises, you can see there are plenty of areas for negotiation - in particular with the carriers - as you evaluate adoption of corporate iPhones.

Comments

[Phil Hodgen]

Wow. You've almost single-handedly persuaded me to stay with my BlackBerry (on T-Mobile). (I don't like the BB).

International data in particular is a way, way better deal on T-Mobile: for $20/month I get unlimited data roaming in Europe, and it is pro-rated by the day. So I turn it on and off when I travel.

Undoubtedly the true comparison is the iPhone cost compared to whatever else you're using (in my case the BB).

But based on your TCO calculations it looks like the iPhone "cool" tax is pretty steep. I'll stick with my boring Curve.

[Gregory Yankelovich]

Vinnie,

I salute you for your bravery of looking at iPhone analytically, without fear of Apple "enthusiasts" wrath. The religious fervor of these people scare me! They are probably one of the biggest reasons I don't buy Apple products.

[vinnie mirchandani]

Greg, actually the Apple share of the TCO will only be 10 to 20% so Apple fans should not take it as beating up Apple...it is the carrier costs which need more scrutiny. Of course, by persisting with single carrier even after initial consumer feedback in US, Apple is not exactly blameless. Also, as apps comes out Apple expects 30% of that developer ecocsystem off the top so the Apple share of TCO may grow.