I have been looking to purchase an iPhone since the launch of the 3Gs. The original plan was to make a purchase while I was on holiday in Italy during August, the primary reason for this was because unlike our unhelpful country here in the UK Italy by law has to sell unlocked phones and I needed a new phone after surrendering my free Nokia when I left to join Tweetdeck.

I knew the cost for the iPhone would be expensive due to the euro exchange rate but well worth not being tied in to an operator and having the freedom to use any SIM plan I like. This would also have the advantage of easy upgrade when Apple release the next generation of iPhone.

So off we go to Italy and I casually approached a number of stores in Rome, our first port of call on our trip. The first store I tried was an official Vodafone store. The response was quite short and sweet “iPhone all finished” I was told. Hmm “all finished?”: i questioned, “yes all gone, finished”. So off I go to the Three Italy store further down the street. Again I got the response “iPhone all finished”. What was going on. After further enquiry the assistant also informed me that the Three iPhones could only be purchased with an Italian credit card as you got a free data plan with them. I offered to pay cash and not have the plan but the assistant informed me that was not possible, plus they had no stock anyway.

After visiting over 11 stores in Rome, Milan and Venice I got a very similar response, in short no iPhones. I was unsure if it was because I was English and they had been ‘advised’ not to sell to anyone who was not Italian or that there was truly no stock in the whole of Italy.

So I returned to the UK iPhone less and a bit disheartened, I personally know two people who have purchased their iPhones 3G’s from Italy with no hassle.

My next option was to purchase a legitimate iPhone 3Gs 32GB from Play.com. They appear to be the only company shipping original unlocked phones from manufacturers. Oh wait a minute they want £899.99 for a 32GB 3Gs!!! Are they serious that is the price of a decent laptop, then add on your airtime billing no way Jose. So moving on it’s back to the O2, the UK’s official iPhone provider.

I don’t have anything against O2, I just was against being locked in for 18 months plus all of the hassle of upgrading. Plus the likelihood of Apple releasing a new upgraded iPhone in the next 12 months is quite high.

So after having a chat over a few beers with my mate Richard (@richardcornock) he enlightened me to the fact that you could grab a pretty decent SIM only package from O2 (simplicity) and use that in a Pay As You Go iPhone. On the surface this sounded like a more expensive option but after close investigation it is the clear winner for me, here how it breaks down.

A PAYG iPhone 32GB costs a hefty £538.30 from O2. This comes with a PAYG SIM card that offers free data and free Wi-Fi (with BT & The Cloud). Of course your calls are going to be really expensive on PAYG. The Simplicity plan from O2 comes in a variety of flavours and varies in time from a 1 month rolling contract to a 12 month contract. The benefit of ordering on line and going for the 12 month tariff are increased minutes and texts PLUS a free O2 bundle. For only £19.58 (correct as of Sept 2009) you get 800 anytime UK minutes plus 1600 texts and free data via the bolt on.

Compare that to the iPhone tariff of £34.26 that only gives you 500 minutes and 600 texts. You DO get free Wi-Fi with your iPhone tariff that you lose with the Simplicity although you could add this on using a bolt on for around £7 a month. I have heard that you can still use your PAYG SIM number to use the Wi-Fi as it’s tied to the IMEI number of your iPhone, this is as of yet untested.

So you can see where I’m going with this, if you can live without the Wi-Fi bundle then the overall cost to you for 12 months 32GB iPhone 3Gs goodness is £773.26 (800 min’s & 1600 txt’s) compared with £890.91 on the iPhone 18 month tariff (500 min’s & 600 txt’s). Total cost of ownership is virtually the same over the course of 18 months £890.00 but you get more minutes and more text’s plus your not locked in for 18 months with the PAYG phone and can upgrade when you like!

If you have the hard earned cash to stump up front then work your figures out, it might not be an unlocked iPhone but I’m still in a better position with more minutes & texts!

Please leave your comments and thoughts.