How Much Did Your Smart Phone Cost?

I’ve been reading smart phone reviews and following the industry on and off for the past couple of years. I didn’t have much interest in the market until the iPhone was released. Although it wasn’t the first smart phone, it certainly hastened the trend of handheld devices combining the functionality of several previously single-purpose gadgets. We’re experiencing the long hoped-for convergence of the mobile phone, text messenger, GPS, PDA, portable email/web browser, music/video player, game console, digital camera, camcorder, digital compass, voice recorder, and so on. Devices like the iPhone, Motorola Droid, and Nokia N900 have much more in common with full-fledged computers than standard cell phones, and as such, it makes sense for them to be priced like computers.

The problem is that customers in the U.S. apparently can’t stand the thought of paying more than $200 for a phone, so instead they sign 2-year contracts with network providers who offer smart phones at a major discount. What most people don’t seem to realize is that they’re simply spreading the cost of the phone over a 24 month period, not to mention getting locked into exorbitant monthly fees with a wireless carrier they can’t leave without coughing up a substantial termination fee.

Even knowing all that, I was surprised when I saw this nifty chart showing the entire two-year cost of using a modern smart phone: Droid vs. iPhone 3GS vs. Palm Pre vs. MyTouch 3G: Total Cost of Ownership

That’s right — the average smart phone user pays about $2,500 over two years, with unlimited plans running closer to $4,000. I don’t know how people can stand to pay that $100-$150 bill, month after month, but this is exactly why I don’t have a smart phone. I’d really like to see them priced independently of wireless plans because I suspect this business model is giving carriers an excuse to charge high monthly rates and excuse it by saying they’re just subsidizing the cost of the smart phone. Let’s have hardware compete directly with hardware and wireless plans directly with wireless plans, and just see if prices don’t go down.

I can’t see myself joining the smart phone revolution until I can buy the hardware for $300-500 and pay around $30 per month for an average service plan. Is that too much to ask?