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Understanding the AT&T and Verizon iPhone 4 Service Plans: What It Really Costs to Own an iPhone

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Now that Verizon is offering the Apple iPhone 4 within the United States along with AT&T, users finally have a choice about which service provider to utilize. Both have benefits and drawbacks, and each has its own selection of service plans to choose from. Best-selling author and avid iPhone/iPad user Jason Rich helps you understand the iPhone 4 service plans and options available, so you can more easily calculate and budget for the true cost of owning and using an iPhone 4 to make calls, sent/receive text messages, and to access the wireless web.

Both AT&T Wireless and Verizon seem to think that owning and using an iPhone 4 is a privilege for which consumers should pay a premium, which is why service plans for these phones tend to cost more than similar plans for other smartphone models (like the Blackberry). Now that Verizon is offering the iPhone 4 (as of February 10, 2011), consumers can hope that competition will lower prices for iPhone 4 service plans, but at least initially, this hasn't happened.

So, if you want to own and use an iPhone, you're about to discover some of the costs you'll need to take on for the privilege. First, you need to purchase the phone. This costs $199 (for the 16GB model) or $299 (for the 32GB model), if you activate the phone with a two-year service agreement with either AT&T Wireless or Verizon.

Next, you need to decide if you want the optional AppleCare service plan ($69), which protects the phone from certain types of breakage for two years, plus unlimited Apple technical support in-person at Apple Stores or on the phone. Or, you can purchase optional third-party iPhone 4 insurance, which protects against things like theft and water damage to the phone, which AppleCare does not cover. (This will cost $50-$100 per year).

Purchasing some type of insurance for your iPhone 4 is highly recommended. iPhone 4 repairs (without insurance) are costly, and if you need to replace the phone before you re-qualify for a phone upgrade, the cost will be between $599-$649.99 for the 16GB model, or between $699-$749.99 for the 32GB model (depending on which carrier the phone is compatible with).

In addition to AppleCare (and/or other third-party insurance), consider purchasing a screen protector for your device, as well as a case to protect it against scratches or accidental drops. A screen protector will cost around $15, while the price of a case will range from $19-$100+, depending on the design and manufacturer.

With your new iPhone 4 in hand, it now has to be activated with a service plan through either AT&T Wireless or Verizon. Both companies require a two-year service commitment, with a hefty termination fee (up to $325) if you opt to cancel the contract early.

The iPhone 4 Service Plans

An individual service plan for the iPhone 4 has three main components: voice calls, text messaging, and wireless data service. With AT&T Wireless, you can have unlimited nationwide calling for $69.99 per month, or 900 minutes of calling (with rollover minutes) for $59.99 per month. There's also a 450-minute voice plan for $39.99 per month (also with rollover minutes). Unused rollover minutes get banked and can be used in future months, but limitations apply and they do eventually expire.

On the non-unlimited voices plans, minutes are deducted for calls made or received between 6:00am-8:59pm. During nights and weekends (between 9:00pm-5:59am and all day/night on weekends), calls are free. The $39.99 voice plan includes 5,000 nights and weekend minutes, while the $59.99 plan includes an unlimited number of nights and weekend minutes.

If you exceed your allocated number of daytime minutes, the fee is 45 cents per minute if you're signed up for the $39.95 plan, or 40 cents per minute if you're signed up for the $59.99 plan. All plans are for domestic calls only. You will pay a per-minute premium to make calls overseas, and an even higher premium if you travel abroad and use your iPhone.

To be able to send and receive text messages from your iPhone, plan on adding an additional $20 per month fee to your bill for unlimited text messaging. You can also opt for a $5 plan that allows for 200 messages (with additional text messages costing 10 cents each), or a $15 plan that allows for 1,500 messages (with additional text messages costing 5 cents each). With no text messaging plan, you will pay 20 cents per incoming or outgoing text message, or 30 cents per picture/video message.

Now for the data plan. With AT&T Wireless, this starts at $15 per month for 200MB of data. Additional data is billed at $15 per 200MB. You can upgrade to a 2GB per month data plan for $25 per month (with each additional 1GB costing $10), or for $45 per month, you can acquire a 2GB plan that also allows tethering. This means that your iPhone can serve as a Wi-Fi hotspot for other devices, such as an iPad. With the tethering plan, each additional 1GB of usage will cost $10 per month.

There is no charge whatsoever to turn on and use the Wi-Fi capabilities of your iPhone to surf the web, providing you're within an unlocked Wi-Fi hotspot that does not charge for connectivity (such as in your home or office, for example).

While AT&T Wireless initially offered a flat-fee unlimited data plan, this is not currently being offered to iPhone 4 users. Some of the additional options you can add to your individual service plan include:

  • VoiceDial: $4.99/month
  • AT&T Navigator for iPhone GPS service with turn-by-turn directions: $9.99/month
  • Early nights and weekends: $8.99/month. Free night and weekend calling goes from 7:00pm-7:00am daily, and all day/night on weekends.

Finally, in addition to these recurring charges, your monthly service bill will include applicable taxes, plus any additional fees (such as international roaming) that you incur.

While you can not cancel your plan outright for two years, you can modify it, but additional conditions and restrictions will apply. For example, you may need to begin the two-year contract all over again.

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