Apple announced at the WWDC 2009 Keynote address yesterday that their third generation iPhone, iPhone 3G S will be available on June 19.

As expected they didn’t change the price of their new, faster iPhone. $199 for the 16GB model and $299 for the 32GB model for "new and qualifying customers".

However, if you are an existing iPhone 3G user then you will have to pay a premium over the subsidized pricing to upgrade, which doesn’t seem to have gone too well with them based on comments from some of our readers who are already ticked off as MMS and Tethering available won't be available at the time of launch of iPhone OS 3.0.

So I thought of going through it in details to give you a better perspective of iPhone 3G S pricing and to find out if it is fair.

iPhone 3G users:

There are two things that iPhone 3G users who are planning to upgrade to iPhone 3G S need to worry about. The pricing and the eligibility date.

Here is a breakdown of the three AT&T customer classes and associated iPhone pricing follows:

The pricing for new and qualifying AT&T customers are as follows:

• 16GB iPhone 3G S (black or white) will cost $199.
• 32GB iPhone 3G S (black or white) will cost $299.

The pricing for early upgrade customers (iPhone 3G owners):

• 16GB iPhone 3G S (black or white) will cost $399.00.
• 32GB iPhone 3G S (black or white) will cost $499.00.

No-contract, no-commit pricing (same for non-qualifying customers):

• 16GB iPhone 3G S (black or white) will cost $599.00.
• 32GB iPhone 3G S (black or white) will cost $699.00.

Existing iPhone 3G users are complaining that they can’t avail of the subsidized rates that is available to new customers.

The reason for paying a premium is because they had already got the subsidized rates when they bought iPhone 3G, which is essentially given by AT&T for signing a two-year contract.

It’s clear from the no-contract, no commit-pricing that AT&T attaches a $200 premium for each year of the contract, which amounts to $400 over the two-year contract.

This is where the eligibility date comes in if you check for early upgrade pricing at Apple's website at http://buyiphone.apple.com.

For example: If you had bought an iPhone 3G at the time of launch last year, which was July 11th then you will be eligible to upgrade to iPhone 3G S on 11th July and the pricing that you should see is as follows:

• 16GB iPhone 3G S (black or white) will cost $399.00.
• 32GB iPhone 3G S (black or white) will cost $499.00.

As you would have used your iPhone 3G for one year and hence compensated AT&T for a year’s subsidy which is $200, but you still need to pay $200 to cover for the subsidy of your iPhone 3G for the remaining one more year of your two-year contract.

AT&T will also charge $18 upgrade fee. I’m not sure why AT&T charges this fee.

If you are thinking of paying an early termination fee of $175 to get around this, please be careful as this could put you in the non-qualified customers category where you will have to pay $599 (16GB), or $699 (32GB) for a new two-year agreement.

Original iPhone users:

Original iPhone or first generation iPhone owners should be able to avail of the same rates as new customers as they didn’t get the additional $200 subsidy which was introduced with iPhone 3G. But I’m guessing they will have to pay revised monthly rates available with iPhone 3G S.

Is the early upgrade pricing for iPhone 3G fair?

This is how subsidy works so some might say it is unreasonable for iPhone 3G users to expect AT&T to offer them prices offered to new customer without completing their two-year contract. If they want the new pricing the only option iPhone 3G user should complete the two-year contract.

I tend to agree but AT&T could have at least offered a $50 or $100 discount as a loyalty reward for its existing iPhone 3G users as an incentive to renew the contract for two more years. 

I might have not covered all scenarios so please feel free to drop us a line and we or our great readers will try our best to answer them.

Based on the above pricing, it will be interesting to see how many of you are planning to upgrade to iPhone 3G S, so please let us know in the comment section below.