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In a move that will certainly win me no friends at Apple (Nasdaq: AAPL), I simply can't in good conscience recommend the iPhone 3G to existing iPhone customers.
Don't get me wrong. I have an iPhone 3G myself, and I upgraded from my existing iPhone, and I love both. As I've mentioned before, once you go iPhone, you never go back.
Still, there are only a few situations where it makes sense to upgrade from iPhone to iPhone 3G -- and what's more, there are several reasons why you shouldn't.
First, Think Twice
In reality, there are only two major differences between iPhone and iPhone 3G: EDGE vs. 3G cellular service and built-in GPS (global positioning system).
3G provides faster Internet speeds -- about twice as fast as AT&T's (NYSE: T) EDGE in the United States. At the same time, it also drains batteries much faster, and the iPhone doesn't have a user-replaceable battery. iPhone 3G users could find themselves out of juice by the end of the day in situations where they were able to squeak by with their EDGE-based iPhones.
As for GPS, it's pretty cool, but most users don't really need it yet -- it's a "want" feature more than a "need" feature. If you're on a budget -- and who isn't in America these days? -- the difference between want and need can be critical, especially when you start looking at AT&T's new rates of service.
Higher Service Fees
While the cost of acquisition has dropped to US$199 for an 8 GB iPhone 3G and $299 for a 16 GB model, AT&T also charges an upgrade fee of its own, which will inch the price a bit higher. Toss in taxes, and suddenly there's another $40 heading out of the wallet. Next, consider that AT&T's new unlimited -- and required -- data plan for iPhone 3G is $30 per month instead of $20 per month. And oh yeah, 200 text messages will cost you another $5 per month -- or more, if you're a heavy text message sender and need more than that.
Over the life of the phone, most customers will end up spending more than they did for their first-generation iPhone -- and this is for a unit that, according to iSuppli, costs about $50 less to manufacture.
So Where's the Big Upgrade?
If you truly need 3G because you get better service in your area -- or you're out and about and need the faster Internet access -- you probably already have an iPhone 3G in hand. Similarly, if you're always lost or are heavy into location-aware socialization applications, the GPS would be important enough to warrant an upgrade. Beyond those two items, what's left?
The new headphone jack isn't quite so recessed, making it easier to plug in headphones. Cool, but not worth hundreds of dollars. The audio is louder and clearer, particularly the speakerphone, so that's a welcome improvement ... but again, is that worth an upgrade?
I think not.
No Upgraded Camera? No Video?
Prior to the iPhone 3G release, rumors ran rampant that Apple would introduce a front-facing camera so that you could do video conferencing from your iPhone 3G. That didn't pan out, and while it's mildly disappointing, what's also bad is that the 2.0 megapixel camera didn't get an upgrade, either.
The cost to beef it up a couple of megapixels is only a few dollars -- at least according to iSuppli -- and the potential consumer benefit would be huge. I don't always have my camera on me, but I usually have my iPhone. It sucks to have to settle for lower resolution when you know that Apple could do so much better.
Plus, there's no video capability. Apple might offer such a capability in the future as a software upgrade, but still, I've seen phones that are vastly inferior put out some surprisingly handy video clips.
New Software and the App Store
The most important reason current iPhone owners shouldn't leap into 3G is the fact that Apple just delivered an incredibly valuable free upgrade: the iPhone 2.0 software update and the online App Store. The software brings enterprise-class functionality with it, including support for Microsoft (Nasdaq: MSFT) Exchange and the ability to push e-mail 
and calendering events, as well as security features to placate corporate IT administrators.
For consumers, the App Store provides more than 800 applications and games, many of which are entirely free. Some are handy, like news feed aggregators that finally make reading news stories on your iPhone easy and enjoyable. Others include task managers and lists, ranging from tiny little applications to ones that connect users to enterprise-class Oracle (Nasdaq: ORCL) business reports. The games using the accelerometer and graphics are fun and diverting ... and you get access to it all free with 2.0 and the App Store.
You Should Wait
If you can wait, try to hold off as long as you can. First of all, there's a decent chance that Apple will introduce some cool upgrades around the holidays. If it skips the holidays, then the Macworld conference in January may deliver some interesting news. By then, you could have a phone with more memory and a better camera, if not improved battery life.
And I'd say these adjustments would be the least of any incremental improvements Apple may make to the phone. It's not out of the realm of possibility that Apple could introduce a new form factor, if not some new colors. Plus, what about the processor? Some of the guts of the iPhone have changed, but overall, if there are any operating system processor changes, they aren't noticeable in day-to-day use.
I'm not saying the iPhone is slow, just that the iPhone 3G's 2.0 software interface doesn't seem appreciably faster than the first generation. Even if the form factor stays the same, you might get a faster-feeling iPhone in less than a year.
Of course, all this is easy for me to say: I waited in line on July 11 and walked out of an AT&T store with a new iPhone 3G.
Knowing what I know now, I think I could have waited a bit longer for the next iteration. For existing iPhone owners, I wish you luck and strength of will. Apple will bring even more iPhone goodness soon, and when it does, those who upgraded now will be eying you with envy as we sit locked into our service provider contracts. Be strong!
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