Everyone knows that at £99, the iPhone 3G 8Gb is much cheaper to buy than the original model (which started at £269 and was then reduced to £169), but how much does each phone cost over the minimum 18-month contract with O2?

The good news is that not only is the iPhone 3G cheaper to make than the original model, but it’s cheaper to own, too. Based on the final £169 pricing (just before the iPhone was withdrawn from sale), the total cost of ownership for the original 8Gb iPhone over the full term of the cheapest 18-month contract was £799, assuming you stayed within the monthly call and SMS allowances. In contrast, the iPhone 3G 8Gb’s total cost on the cheapest O2 tariff is £639 – or £160 less.

Buy the 16Gb iPhone for £159 on the same tariff and you'll save a whopping £260 over 18 months, compared to the original 16Gb model.

This differs to the situation in the US, incidentally, where AT&T’s increased charges for 3G data makes the iPhone 3G more expensive that the original model over the full two-year contract term. On AT&T's cheapest tariff, the iPhone 3G 8Gb costs $1,878 over two years – that's £962, or £163 more than O2s cheapest tariff.

Of course O2's cheapest £30/month tariff does have reduced call and text message allowances and if you exceed these limits to the tune of of the original iPhone's tariff (600 minutes, 500 texts), the total cost over 18 months leaps to £819 for the 8Gb iPhone 3G and £879 for the 16Gb model (excess calls cost 20p/minutes, excess text messages are 12p each).

Fortunately, the £35/month tariff still works out cheaper than the old tariff, too – £729 for the 8Gb iPhone 3G and £789 for the 16Gb. This is a saving of £70 and £170, respectively, though it's obviously only a result of the cheaper up-front cost of theiPhone 3G.

The table below shows the full breakdown of costs for the original iPhone and the iPhone 3G with O2 , together with the total costs by the end of the minimum 18-month contract.

[O2]

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