How Much Does It Really Cost to Own a Smart Phone?

We compared the two-year total cost of ownership for eight of today's hottest smart phones and found that among the top-selling models there's really not much of a price difference at all.

Concerned about the long-term expense of owning a smart phone? You should be. But we found that, among the most popular smart phones on the market today, there isn't a big difference in the total cost of ownership (device, service contract and so on) over two years -- they all come in at around $3,800.

If you're looking for a less expensive smart phone, however, you might consider a lower-priced newcomer such as the Palm Pre or the HTC G1, which end up costing hundreds less than the more popular BlackBerry and iPhone models at the end of two years.

We compared the total cost of ownership for two years (the normal term of a wireless service contract), as well as the (amortized) monthly cost. For instance, you'll pay a total of $3,835.75 in the first two years with your new iPhone 3GS (16GB), or about $160 per month (and that's excluding the monthly smorgasbord of taxes, fees and surcharges you'll pay, which vary from locale to locale). For a lot of folks, the monthly smart phone bill can be as big as, say, a car payment.

On the other hand, Sprint is fighting for market share by offering the Palm Pre for a monthly cost of ownership of about $110. Similarly, you can own a T-Mobile HTC G1 for about $133 per month.

The biggest-selling smart phones on the market, however, bear strikingly similar two-year cost-of-ownership figures. The iPhone 3GS, the BlackBerry Curve from both AT&T and Verizon, the BlackBerry Storm and BlackBerry Tour from Verizon and the Nokia E71 from AT&T each cost between $150 and $160 per month to own. While the costs of the devices themselves vary, the unlimited voice, messaging and wireless broadband rates for the six AT&T and Verizon smart phones in our study are exactly the same.

Why is that? In the words of Verizon Wireless spokesperson Ken Muche: "It's a very competitive landscape." Wireless providers see an enormous amount of money to be made from selling high-profit-margin services such as wireless broadband and text messaging to smart phone users. Analysts will tell you, for example, that the immensely popular iPhone has almost single-handedly buoyed AT&T's wireless business for the past two years. And, of course, Sprint, T-Mobile and Verizon are fighting for every bit of that profit they can get.

Because of that profit potential and the fact that first-time smart phone buyers are constantly and increasingly being lured into the market, competition among the devices and related services is intense. Let's just hope that, with the entrance of more competitively priced challengers like the Palm Pre and HTC G1, the cost of ownership for smart phones in general will dip -- and that your smart phone bill will carry a little less sting at the end of the month.

By Mark Sullivan, PC World