Is the First-Gen iPhone Better Than the iPhone 3G?

I was sitting on a Chicago train on my way home from work, playing a game of Teto Teto!! on my first-gen iPhone. The lady sitting next to me suddenly asks, "Is that one of the new ones?"

"It's the original version," I responded.

"Oh, I wish I still had mine. My husband upgraded me the iPhone 3G, and I hate it. It only gets 5 hours of battery life."

"Do you like the apps and games and stuff?"

"I don't know. It keeps crashing and I can't get anything on it."

What followed was a 10 minute whining session about the iPhone 3G and her husband's bad decision making. A part of me wanted to troubleshoot her problems, but instead I just nodded in sympathy. For strangers, I know to keep my nerdery in check.

But the conversation on the train confirms my feelings over the past month of not wanting to upgrade. My original decision was based on economics. No free text messages? $10 a more a month on top of an already outrageous pricing plan? An upgrade fee on a free upgrade, huh? Higher taxes on the bill? No thanks, but maybe someday.

I'm one of those people who rarely makes a call on my cell phone. But here I am, paying AT&T Wireless $39.99 a month to make make 20 calls a month. That's over a $1.00 a phone call for mainly local calls. So you can see, I'm already getting fleeced.

But the battery issue is a deal breaker. Having a charged battery is the difference between having a phone or carrying around the world's most beautiful brick.

Steve Jobs was right about 3G, the technology isn't ready for prime time, at least not in the US. But nevertheless, there it is, on the phone because people were whining about it incessantly. And sure enough, they're selling like hotcakes. But at what cost to customer's perception Apple and the iPhone?

How Much is Apple Getting from AT&T for Each iPhone 3G?

Now that AT&T is no longer delivering revenue sharing, I wonder how much they're giving Apple upfront for every iPhone activated?

A clue may be in the price Vodafone is selling a contract-free iPhone 3G in Italy. They are selling the 8 gb for 449 euros, which is about $691, and the 16 gb for 569 euros, which is about $876 (according to Google's rate conversion for today).

If we assume those prices are what Apple would sell the iPhone in the US, then AT&T is reimbursing Apple $492 for the 8 gb and $577 for the 16 gb.

If we look back to revenue sharing and say Apple was getting $15 a month per contract, that comes out to $360 for each iPhone over a span of two years. Could AT&T have upped the ante in order to get the more draconian activation rules in place?

If I were AT&T, I would definitely up the ante, especially knowing just how powerful the new enterprise features in the iPhone are. They have to be salivating at the thought of getting contracts from the corporate world--the easiest big money out there. Plus, they are making an extra $10 per month on the $30 data plans. If Verizon didn't regret passing on the iPhone the first time they saw it, they have now with the iPhone 3G.

I did not think Apple would allow the kind of shitty customer experience that comes with phone activation for the iPhone. But I think all that upfront cash changed their mind.