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Apple’s Real Surprise: A Free iPhone

The iPhone 3GS is now free with a two-year AT&T contract / iStockphoto

A free iPhone is no longer just the purview of spam emails and suspicious web pop-ups.

Apple announced today that the iPhone 4S starting price would be $199 for a 16GB version when you sign a two-year cellphone contract. As a result, the once-$199-and-up iPhone 4 now starts as low as $99 for a new 8GB model at AT&T and Verizon, and the $49 8GB 3GS is now free with a two-year AT&T contract.

The free 3GS is likely to appeal to AT&T customers previously priced out of buying an iPhone, says Samir Sakpal, an industry manager and senior analyst for Frost & Sullivan. “It’s a good device; it’s just not the latest,” he says. But it’s not worth switching carriers for, either. The camera is a measly 3 megapixels and there’s no FaceTime video calling. The most noticeable difference for most users will be speed: the older phone just doesn’t surf as fast. Still, that may not be a deal-breaker for parents buying a teen’s first smartphone or mid-contract consumers looking for a cheap replacement for a broken phone, Sakpal says.

Consumers looking to sign a new contract are better off shelling out an extra $100 for a brand-new iPhone 4S  instead of the discounted iPhone 4, says Delly Tamer, founder of plan-comparison site LetsTalk.com. “It’s almost like the iPhone 4 is stuck in the middle,” he says. “Either spend the money and get the iPhone 4S, or go the cheapest way you can and get the 3GS.” The extra outlay up-front is a good trade-off for faster speeds, 1080p HD video recording and voice-command app Siri, plus, the iPhone 4S is also likely to hold its value better at resale, Tamer says.

Whichever older model you’re looking for, your best bet is still to buy through your carrier. International demand inflates secondhand prices — that free 3GS still commands more than $300 on eBay. Verizon and AT&T also offer some pre-owned iPhone 4 handsets, which can cut your bill further.

Correction: An earlier version incorrectly stated the capacity of the iPhone 4 and the screen size of the iPhone 4GS.


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Comments (5 of 12)

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    • $15 mo for two years is $360, not $860.

      Good to see all the comments here as I’m preparing to upgrade from my old razor phone.

    • I like the magazine! Thank you!

    • If it were free, they wouldn’t make you sign up for 2 years service.

    • oh,it is a good idea.

    • this article is incorrect. there will be on 16gb iphone 4 available only 8gb, which is $99. look on apple.com

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  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.