Debunking the iPhone Total Cost of Ownership meme (again).

3G iPhoneWhen the 1st gen iPhone came out, I got annoyed at reviews proclaiming that it cost too much when you factor in the cost of the voice/data plan (see my previous post). I figured that with the release of the 3G iPhone (and its cost being cut in half) would stop the usage of this ridiculous argument, but I was wrong. It seems now even more people are complaining about to TCO of the iPhone over a 2-year plan. So here I am ranting again against the TCO argument, using similar examples in the hopes that people will consider them (highly doubtful):

Every negative review just loooooooooves to point out that despite the fact that the price has been slashed to $199/$299, it ends up costing the same (or more) when you factor in the AT&T voice & data plans over the span of the required 2-year contract. That is a valid point. The problem I have with using this point is this: since when did service and residual costs become a negative point against any product? Lets try a few examples:

How about that 32″ LCD HDTV you just spent $700 on? Great price! Those used to cost $1500 last year! But wait.. you forgot to include the two years of service from your cable/satellite company. After all, without that, your shiny new TV is basically useless. So lets do some math here, based on my cable bill from Cox Communications last month:

Cox Limited Basic $12.95
Cox Expanded Service $34.00
Cox Digital Cable Service $10.00
HBO $11.00
Cox Digital Video Recorder Service $9.95
Digital Receiver – DVR/HD $5.25
TOTAL $83.15/month

So on top of the $700 for the TV itself, we have an additional $83.15/month to make it useful, for a whopping total cost of $2,695.60 to purchase that new TV. And that’s not even including taxes/fees charged by Cox or the electricity to power the thing. So why don’t people mention this in TV reviews? I can see it now: “Yeah $700 is a good price, but after 2 years of running the thing, it actually costs $2,695.60!” Of course that is a valid point, but the problem is: no one ever makes it. So why make it against the iPhone?

Lets try another example, one that is all the more relevant in today’s world of inflated fuel prices: Cars. Nowadays people pay more attention to fuel costs, but when purchasing a car, do people actually do the math and calculate how much it will cost to operate a car over a 5-year lifespan? No. Do they include oil changes and maintenance estimates? No. The irony here is that on most sticker prices on car lots you will in fact see the fuel estimates to operate the car over X number of years. But most people don’t even consider residual costs when purchasing a car. So why should we consider them when purchasing an iPhone?

And now the most ridiculous example of them all: other phones. People are using the TCO argument against the iPhone as if all other phones don’t have the same issue. What can you get a RAZR for now, like $9.99? I remember when it cost more than an iPhone. Perspective, people! Lets see some intellectual honesty here and admit that it actually will cost you at least $968.79 ($9.99 + $39.99 * 24) for that $9.99 RAZR. Where’s the outrage there? All phones are subject to the same issue, so if you’re going to argue against the TCO of the iPhone, you’ve got to do the same for all other phones, including the iPhone “killers.”

It seems to me that the haters are grasping at illegitimate straws to make their anti-iPhone arguments. First they complain that it costs too much, then when the price is slashed in half they complain that it’s not actually cheaper. I am in no way stating that the iPhone is the perfect phone — far from it — but it is a damn fine piece of engineering (both hardware and software), and well worth the costs in my opinion. And that’s including the 2-year contract fee. So there.

iPhone haters: Quit calculating Total Cost of Ownership (TCO)

One argument I see people using against the iPhone is the cost. Granted, $499-$599 is a bit pricey, but what really gets me angry is when people use the flawed argument that the total cost of owning an iPhone is “$2,600-$3,200” if you factor in the cost of the service contract. While that may be true, so what? Lets use some analogies:

  • That new car you bought wasn’t $20,000, it was $200,000. You forgot to factor in the cost of fuel and insurance over the life of the car!
  • That new computer you bought wasn’t $999, it was $10,000. You forgot to factor in the price of your ISP and electrical bills!
  • That new flat-screen TV you just bought wasn’t $1,200, it was $8,000. You forgot to factor in the price of your cable box and service over the next 2 years!
  • You really should stop drinking beer, it’ll cost you $5,000 over the next couple years!

See how ridiculous those arguments sound? Arguing that the iPhone will cost $3k is just as ridiculous. While the claim may be true, no one truly considers ancillary costs when making a purchase like this. It’s a disingenuous and dishonest argument used by people who are trying to find fault with this wonderful new device.

Not to mention the fact that no one is producing similar costs for rival phones in their arguments. I wonder what the TCO for a Crackberry is? I’d like to see that number compared to the iPhone’s. Maybe then we can start a decent dialogue about the iPhone vs. its rivals when it comes to cost.