Pre vs. iPhone: Which offers the better value?

The Palm Pre's slick new software and cool design may make it the first true iPhone challenger on the market, but the competitively priced service plans from Sprint Nextel make the device an even more compelling alternative for frugal cellphone subscribers.

In terms of features, the Pre matches the iPhone on most bells and whistles . And it even has a few new capabilities not seen on the iPhone, such as an actual QWERTY keypad and the ability to have multiple applications open at once.

But for financially savvy shoppers, the Pre on Sprint's 3G network offers a value proposition that may just be enough to tip the scale when deciding between smartphones.

In terms of the upfront cost of the devices, the iPhone and the Pre are the same. The 8GB iPhone 3G costs $200, and so does the Pre with a $100 mail-in rebate. But it's really the service contract from Sprint that sets the Pre apart from the iPhone from a cost perspective.

"Feature for feature these phones are very comparable," said Peter Pham, CEO of Billshrink.com, a Web site that helps consumers cut waste out of their monthly bills. "But when you look at the total cost of ownership, the Pre on Sprint's network offers better value for many consumers."

Here's a breakdown comparing the two service plans:

Palm Pre (Sprint)

•  $200: cost of phone with $100 rebate
•  $70 per month: 450 voice minutes with unlimited messaging and data
•  $90 per month: 900 voice minutes, unlimited messaging and data
•  $100 per month: Unlimited voice minutes, messaging and data

iPhone (AT&T)

•  $200: cost of phone
•  $90 per month: 450 voice minutes, unlimited messaging and data
•  $110 per month: 900 voice minute, unlimited messaging and data
•  $150 per month: Unlimited voice minutes, messaging and data

The iPhone and the Pre each require a two-year contract. This means a power user, who subscribes to an unlimited everything plan would pay $3,600 before taxes and fees for the iPhone on AT&T's network. The same customer, getting a comparable service from Sprint, would pay $2,400 before taxes and fees. Over the two-year contract period, the Sprint Pre customer will save a total of $1,200.

While it seems pretty clear that the Pre from Sprint offers a better value, Pham said many consumers don't look at the total cost of ownership when shopping for a new phone and are often surprised down the road when they look at their phone bills.

"Most people don't realize how much they are paying for their service until they are about six to seven months into their two-year contracts," he said. "And then they start to realize that their bills are really high."

Pham also said most cell phone subscribers overpay for their service.

"I would say that eight out of 10 cell phone users are overpaying for the service they use each month," he said.

He suggests consumers use a tool on billshrink.com that analyzes cell phone bills to see when the most calls are made and to whom. The tool provides a summary showing consumers how many of their calls are free calls made to other people using the same cell phone network or calls made during nights and weekends. The tool also offers suggestions for new service plans that better fit the consumer's needs.

It will be interesting to see if Sprint's lower cost plans tips the scale for potential Pre customers. If it does, it will also be interesting to see if AT&T and other carriers, such as Verizon Wireless, which is also expected to get the Pre, will lower their prices to compete.