Ask Maggie: Am I better off with an iPhone 3GS?

Geeks will always tell you to get the latest and greatest product on the market, but sometimes choosing a previous generation product will satisfy your needs without breaking the bank.

In this week's column I answer a question from a reader who needs a new iPhone and can't decide whether to get the older-generation iPhone 3GS or the iPhone 4. Most technophiles would scoff at such a question. Who actually buys last year's model when this year's model is available? What do you think? I outline the pros and cons below. Feel free to add to the list in the comment section.

Ask Maggie also helps another reader who is looking to boost his Sprint cell phone signal in his home. And finally, Ask Maggie tackles yet another tax question. This time, it's all about avoiding hefty sales taxes on smartphones.

Ask Maggie is a weekly advice column that answers readers' wireless and broadband questions. If you've got a question, please send me an e-mail at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header.

iPhone 3GS or iPhone 4?

Dear Maggie,

I have the original iPhone. My contract is up and I'm ready for a new phone. My current iPhone only rings when it's plugged in and charging. Anyway, I've heard that the iPhone 4 has had a lot of problems. I haven't heard of many problems with the iPhone 3GS. And I was wondering if you think it's better to get the 3GS instead of the iPhone 4?

Dear Brian,

This is a great question. Initially, my gut reaction to your question was to tell you to get the iPhone 4. It's the latest and greatest in technology that Apple has to offer, so why would you get the previous generation, which doesn't have all the bells and whistles? But that might just be my inner geek talking.

There is actually nothing wrong with the iPhone 3GS. In fact, the iPhone 3GS and the iPhone 4 use the same AT&T 3G wireless network. While some people believe the iPhone 4 uses a faster 4G wireless network, the reality is that AT&T does not have a 4G wireless network yet. And when it does, the iPhone 4 will not be able to take advantage of it. Since you have been using the original iPhone for the past couple of years, which uses AT&T's slower 2.5G network, either device is going to feel like a big leap in performance for you.

In an effort to help you make your decision, I'm going to lay out the pros and cons of each device for you:

iPhone 4

Pros: The iPhone 4 comes with a slew of new hardware features that are not offered on previous generations of the iPhone. The most important update is the camera. The iPhone 4 not only has the traditional camera on the back, but it also has a front-facing camera that when used with the Face Time app allows users to video chat while in a Wi-Fi hot spot. The front-facing camera is also great for taking pictures or video of yourself.

The updated camera has a resolution of 5 megapixels and shoots video in high-definition. And for the first time, Apple has added a flash to the camera so that you can take pictures in low light. And it has a 5x zoom that allows you to get closer to your subject when you are far away.

The other major improvement on the iPhone 4 is the high-quality Retina display. The display is one of the best in the industry offering some of the most crisp and brightest images.

Cons: As you alluded to in your question, the iPhone 4 has had some problems with dropped calls due to the construction of the antenna. Because the antenna is exposed and wraps around the phone if you put your hand over a spot near the bottom of the phone, the signal is often disrupted and calls can be interrupted.

Apple says that this is a common problem with many cell phones that have the antenna situated on the bottom of the phone. But Kent German, a senior Reviews editor at CNET, who has tested the iPhone among hundreds of other devices, said he believes the iPhone 4 antenna issues are different.

"None of the older iPhones suffered from the same antenna problems in our testing," he said. "I think those were unique to the iPhone 4."

Of course, you can use a rubber bumper on your phone, and that should alleviate the problem. But there have been other reports of minor issues with the phone including, the fact that the display screen scratches more easily. Apple stopped selling a particular sliding case because of complaints about scratched displays.

Another potential con when compared to the iPhone 3GS is that an iPhone 4 costs more. The iPhone 4 with 16GB of memory costs $199 with a two-year contract, whereas the 8GB iPhone 3GS will only set you back $99 with a two-year contract.

iPhone 3GS

Pros: As I mentioned in the cons of the iPhone 4, the 8GB iPhone 3GS is half the price of the 16GB iPhone 4. And the 16GB iPhone 3GS is $50 less than the 16GB iPhone 4. This may not sway most people, but if you're on a tight budget, it's something to consider.

Another bit of good news is that many of the new software enhancements for the iPhone 4 came from an update to the device's iOS software. And these updates are also available for the iPhone 3GS.

For example, multitasking was originally missing from the iPhone 3GS and other versions of the iPhone. But the iOS 4.0 released the same day the iPhone 4 went on sale offered the ability to run multiple applications at once. Another key software update in iOS 4.0 was the ability to turn the iPhone into a wireless modem. There is an additional fee associated with "tethering", but this capability had been missing from previous versions of the product. Another addition is the ability to group apps together to create home screen folders with multiple apps that helps users conserve space on the home screen display. The iPhone 3GS also offers the consolidated mailbox, so that you can merge multiple e-mail accounts.

Cons: As mentioned before, the iPhone 3GS lacks the hardware enhancements of the iPhone 4. There is no front-facing camera, no zoom, and no flash. There is video, but it's not in high-definition.

Another consideration is that Apple is an innovative company that is constantly moving forward technologically. It has a poor history of making sure its older products are compatible with new features it introduces in newer products. So even though many of the iOS 4.0 and subsequent updates have worked on both the iPhone 4 and iPhone 3GS, you may not be able to count on this going forward.

"With Apple often you have to upgrade or lose out on new features," Kent German, CNET Reviews senior editor, said. "Faithful Apple fans are happy to do this, so if you get something older, the danger is that when something new comes out, you might get left behind."

So the bottom line is that the issues you are concerned about on the iPhone can be mitigated with a rubber bumper. But if you don't care about all the fancy hardware enhancements, the iPhone 3GS would be a fine choice for you. And you wouldn't have to pay as much for it.

And depending on how much you want to spend on a new phone, you might also want to check out refurbished iPhones from AT&T. Both the iPhone 4 and iPhone 3GS are sold used on AT&T's Web site for a discount.

Boosting indoor cell coverage

Dear Maggie,

I have a BlackBerry on T-Mobile and a Droid (the original one) on Verizon. I tried the Sprint EVO 4G. I could get good coverage outdoors, but I can rarely have a full conversation inside. I live in a 1966 construction condo that is mostly earth-sheltered. Is there any technology that can boost signal strength indoors?

Dear Nitalu,

You are not alone in having problems getting decent cell phone reception indoors. This is a common complaint. Sprint does offer a solution. In August the company started shipping its first 3G-capable femtocells. The product called the Airave Access Point acts as a mini cell phone tower in your home. It boosts the cellular signal and uses your home broadband connection to route the voice or data session to its network.

The company has been offering a 2G version of the Airave for a couple of years. The primary difference between the two femtocells is that the earlier product only supports Sprint's 2G CDMA 1x technology, whereas the newer product supports the 3G EV-DO network.

Currently, the 3G Airave is not available for purchase. Sprint is only making the device available to people who qualify. You should check with a Sprint representative because you may actually qualify for the service. Sprint hasn't been clear about whether qualified customers will have to pay additionally for the femtocell service. Sprint told CNET in August when the product launched that they evaluate your eligibility for a free service on a case-by-case basis.

That said, Sprint is still selling its old Airave femtocells. These devices cost $99.99 retail, plus there's a $4.99 a month charge for "Enhanced Coverage." After that, you would need to activate either a $10 a month Single Line Unlimited Calling Plan or a $20 a month Multi-Line Unlimited Calling Plan for those who use family plans.

You mentioned that you have an HTC Evo 4G phone. Currently, Sprint does not offer signal boosting for 4G. This is a particular problem for Sprint and Clearwire, the company building the 4G wireless network, because the spectrum used to build the 4G WiMax network doesn't penetrate buildings easily. But the HTC Evo 4G will fall back to 3G when 4G is not available. And if 3G isn't available it will use the 2G network. So making phone calls shouldn't be a problem, but using data might be painful unless you have Wi-Fi at home.

Another option for improving signal strength is to get a "cell phone signal booster." There are a few companies, including Wilson Electronics, that sell devices that will boost your phone's signal strength. Wilson's latest product promises to boost the signal up to 20 times. The devices work within the 800MHz to 1900MHZ cellular spectrum bands. This covers both GSM and CDMA networks in the U.S., but it does not work with Nextel phones or GSM devices abroad. The products tend to be pricey as well. The Wilson Electronics Sleek costs $129. But unlike the Sprint 2G femtocell, it doesn't require a monthly charge.

If I were you, I'd talk to Sprint and see if you can get a 3G Airave femtocell for free. If you don't qualify, you could consider the 2G version of the product, since 2G would still allow you to make phone calls. I'd make sure to install Wi-Fi for fast data service. You could also try the Wilson Electronics Sleek, which will boost signals for people using Sprint phones as well as phones from Verizon Wireless, AT&T, and T-Mobile USA.

Sales tax on a phone's list price

Hi Maggie,

My state charges sales tax for a new cell phone based upon its list price, not the subsidized purchase price when signing up for a two-year contract.

Dear Lester,

You are correct some states charge tax based on the unsubsidized cost of the phone. Take the iPhone as an example. Even though the advertised price of the iPhone is $199, you may actually have to pay tax on $599. In places such as California, where it has a minimum sales tax of 8.25 percent, you could pay $49.42 instead of $16.42 in sales tax. The rationale is that when you buy the iPhone for $199, you are signing a two-year service contract. As part of that sales contract you are actually paying the full price of the phone over the two year period. So the state wants its fair share of the sales tax up front.

It's a little unfair if you really think about it since the cost of the monthly service is the same regardless of whether you pay full price for the phone. Also a portion of your sales tax is not refunded if you cancel your service early. Plus, as I discussed in last week's Ask Maggie, subscribers are also charged monthly sales tax on the service.

Apple actually lists in fine print a few states that do charge tax based on the unsubsidized price.

"In CA, MA, and RI, sales tax is collected on the unbundled price of the iPhone."

I don't believe this list is comprehensive. I found this out myself earlier this year when I tried to replace my stolen iPhone while at a conference in Las Vegas. The saleswoman told me the phone was subject to tax on the unsubsidized price. I knew this wasn't the case in New York, where I live, so I waited and purchased my new iPhone when I got home.

To answer your question, it is possible to travel to another state to buy a phone to get a better deal on the tax. In fact, that is why there are so many shopping malls in Northern Delaware near Maryland, Pennsylvania, and New Jersey. Delaware is one of five states that charges no sales tax. Alaska, Montana, New Hampshire, and Oregon also do not have a state sales tax.

While many people travel across state lines to shop in states with no sales tax, if you plan to use those items in a state that does have a sales tax, you are supposed to pay a "use tax" in your home state.

As someone who grew up in Delaware, I can tell you that I've never heard of people doing this for consumer products. There's really no way for the state tax authority to know where you bought your phone. I suppose if you got audited, someone might ask where you bought your iPhone. But most people, such as myself, don't keep receipts like that. Of course, for more expensive purchases, such as cars, which have to be registered in your home state, people still end up paying tax even if they bought the car in a tax-free state.

So my advice to you is if you live near one of the five tax-free states, buy your iPhone there and keep your existing phone number and billing address. I'm not sure the $50 or so you'd save in sales tax is really worth a special trip to Alaska or Delaware, but they are lovely places to visit. And if you are just looking for a state that charges tax on the subsidized price of the phone, do your homework before you book your ticket.

Good luck!