Holiday Gift Guide: Buying an iPhone

Welcome to TUAW's 2011 Holiday Gift Guide! We're here to help you choose the best gifts this holiday season, and once you've received your gifts we'll tell you what apps and accessories we think are best for your new Apple gear. Stay tuned every weekday from now until the end of the year for our picks and helpful guides and check our Gift Guide hub to see our guides as they become available. For even more holiday fun, check out sister site Engadget's gift guide.

Two years ago, my best friend bought his wife an iPhone 3GS for Christmas. She totally wasn't expecting it. When she opened the package and saw what was inside, she went crazy with glee. Two years later she still has that phone, and it's become an indispensable tool.

People refer to a lot of things as "the gift that keeps on giving," but it's especially true of the iPhone. Even the iPhone's basic functions via Apple's pre-installed apps can vastly expand the things you're able to accomplish while on the go; once you factor in all the apps on the App Store, theiPhone turns into a full-fledged, powerful, portable computer that quite literally fits in your pocket.

Before I get into discussing which iPhone may be right for that special person in your life, there are a couple things to keep in mind before you decide to give an iPhone as a gift.

Contracts

I called the iPhone "a gift that keeps on giving" earlier, but it's also a gift that keeps on taking. You may think you're doing someone a favor when you give them a US$199 iPhone 4S (and they'll probably think so, too), but that lovely gadget also comes with a significant monthly expense attached to it in the form of a carrier plan.

The cheapest possible (on-contract) iPhone plans in the US, according to the rate plan info on Apple's site:

• AT&T: $54.99
• Sprint: $79.99
• Verizon: $59.99

You might be able to tailor a cheaper pre-pay plan through one of these carriers if you buy an unlocked iPhone instead, but no matter how you look at it, the iPhone is going to incur a monthly expense. This may not be a big deal to you if you're giving the iPhone to your spouse or one of your children, but buying an iPhone for one of your friends or someone outside your immediate family is kind of like buying them a pet: it's not just a one-time gift, but an ongoing and expensive obligation.

Buying an on-contract iPhone also makes it a bit tougher to keep it a surprise, unless you're planning on paying the monthly plan fees yourself. If you're buying an iPhone for someone outside your immediate family and you want to keep it under wraps, the best option is probably going to be buying one of the unlocked, contract-free models -- but keep in mind that those iPhones are significantly more expensive than they are when subsidized through a carrier.

Carriers

The carrier situation in the US is more involved than in most other countries due to the differing technologies US telcos use. Depending on which model of iPhone you're looking at giving, this could considerably affect your options. Apple currently offers four iPhone models, but the carrier compatibility situation is quite complex in the States:

• iPhone 3GS: AT&T only
• iPhone 4: GSM version (AT&T only)
• iPhone 4: CDMA version (Sprint or Verizon only)
• iPhone 4S: Technically universally compatible, but all models are locked to their specific carrier when sold -- even the "unlocked" iPhone 4S will only work on AT&T

Different carriers also offer markedly different quality of service depending on where you are. AT&T is notorious for having terrible service in some parts of the US, so if your gift iPhone is going to someone who lives in an area with little to no AT&T coverage, Verizon or Sprint may be a better choice. Check each carrier's coverage map first before you decide which one to go with; if you give someone an iPhone that's locked to AT&T, but AT&T doesn't offer coverage in their area, you might as well have bought them an iPod touch instead.

The three US carriers also have specific strengths to consider. While AT&T is the only one that supports simultaneous voice and data traffic (and also somewhat higher 3G network speeds, assuming you have coverage), Verizon's overall network coverage and reliability is considered top-notch. Sprint's data plans or support may also draw you in, especially if your intended recipient already has a phone on Sprint; the company is advertising heavily that it has the only "true unlimited" data plan for the iPhone, with no 2GB cap or overage fees.

The carrier situation outside the US usually isn't quite so byzantine, because almost all other countries use the GSM standard instead of CDMA. The only specific carrier recommendations I can make for countries outside the US apply to Australia and New Zealand. For both countries my recommendation is the same: avoid Vodafone if at all possible. My experiences with Vodafone's networks in both nations have been almost universally terrible. Your best bet for sussing out the ideal carrier for you is to ask neighbors or coworkers who already have iPhones (and who commute/hang out in the same general area as you) how they feel about their carrier of choice.

With that out of the way, let's look at which model of iPhone fits your gift-giving mood.

Super-low budget: iPhone 3GS

The iPhone 3GS is available at a very attractive price: free from Apple and nearly free ($1) from AT&T, but both incur a two-year contract. It might therefore look like a great option for a particularly budget-minded gift-giver, and in fact if you're looking at giving an iPhone as a Christmas gift to your teenager, this might be a good choice.

The iPhone 3GS is old, though -- more than two years out of date. It lacks many features that owners of more modern iPhones have come to take for granted, like the Retina Display, faster processors, and much-improved cameras (including the forward-facing camera for FaceTime or Skype use). It's also only available on AT&T in the States, so if you wanted to go with Verizon or Sprint, you're out of luck.

It also comes in only one capacity: 8 GB. That's going to be quite cramped for even light users; between apps, music, photos, videos, and other data, 8 GB just doesn't count for as much as it used to.

The iPhone 3GS is quite far behind at this point in terms of its feature set, and it's unlikely Apple will continue to support the device with iOS updates for the same length of time that it will support more current iPhones. Although the iPhone 3GS is still a decent iPhone, I wouldn't recommend giving one as a gift unless your budget absolutely cannot handle giving an iPhone 4 instead.

Low budget: iPhone 4

For just $99 more than the iPhone 3GS, you can get last year's flagship iPhone, the iPhone 4. Check out all the improvements that $99 gets you:

• More powerful processor, leading to better overall performance (especially in games)
• Much higher quality Retina Display
• Improved battery life
• Much better camera (5 vs. 3 megapixels in the iPhone 3GS) with an LED flash and improved video recording quality
• Front-facing camera for FaceTime
• Noise-cancelling microphone
• Compatibility with Verizon and Sprint (CDMA models only)

The iPhone 4 is still a great phone, and it should offer plenty of power for most users with only one exception: like the iPhone 3GS, the iPhone 4 now comes only in an 8 GB capacity. That may feel even more cramped on the iPhone 4, because the pictures and videos it takes have much larger file sizes than on the iPhone 3GS.

The iPhone 3GS is a decent iPhone, but the iPhone 4 simply blows it away no matter how you look at it. It's also a more attractively-designed phone, and Apple is likely to continue issuing software updates for the iPhone 4 for longer than for the iPhone 3GS. I know if I was receiving an iPhone as a gift, I would much rather receive an iPhone 4 than an iPhone 3GS. That's likely to be true of just about everyone.

Higher budget: iPhone 4S (16 or 32 GB)

Here we hit another $100-200 price jump (depending on which capacity you choose), but again that rise in price nets you some great improvements over the iPhone 4:

• Much more powerful processor -- up to twice as fast as the iPhone 4 for some applications
• Improved camera (8 vs. 5 megapixels in the iPhone 4) with face detection, 1080p video recording, and video stabilization
• Higher data capacity (16 or 32 GB versus 8 GB on the iPhone 4)
• Improved antenna (faster download speeds, better signal quality)
• Siri voice assistant

The iPhone 4S will easily outperform the iPhone 4 at any processor-intensive task, especially gaming. Its camera is much improved, too, especially in low light situations; in fact, the iPhone 4S is arguably a great replacement for a low- to mid-budget point-and-shoot camera.

The higher capacity the iPhone 4S offers over the iPhone 4 will also allow its user to store more music, photos, and apps on the device. 16 GB will probably be enough for light users -- people with small music libraries, not many photos, and only a handful of apps -- but it might start to feel cramped after awhile, especially if the user starts taking lots of videos with the built-in camera. A 32 GB iPhone 4S may be a better choice if the person using it has a lot of media; if this isn't their first iPhone, the person you're giving it to may already have lots of apps, too.

[iTunes Match users can spend less time worrying about how to fit a music library on to the portable device. –Ed.]

Let's be frank, though: Siri is the biggest selling point for the iPhone 4S. It may or may not come to Apple's other devices eventually, but for now the iPhone 4S is the only device that offers Apple's revolutionary new voice-driven interface. As corny as talking to your phone may seem at first, Siri is the kind of feature that seems perfectly natural (maybe even necessary) after using it for awhile.

Money is no object: iPhone 4S (64 GB)

Even with a two-year contract, the biggest, baddest iPhone on the block is going to set you back almost $400. The unlocked, contract-free version is an even more staggering $849 -- $20 more than an iPad 2 Wi-Fi + 3G model with the same storage capacity.

Though the 64 GB iPhone 4S offers no other improvements over the smaller capacity iPhone 4S models, the higher capacity is definitely going to come in handy for "power users" with huge music libraries, hundreds of apps, thousands of photos, or any combination of those items.

The 64 GB iPhone 4S is Apple's first iPhone to come in that capacity, and that's the model I snagged for myself. It holds all of my music (well, all the stuff I actually listen to anyway), almost 200 apps, over five hours of videos, and it still has enough space left over that I can take hundreds of photos or an hour of high-def video without worrying about deleting things first.

That having been said, once you get into this pricing territory you have to start wondering whether an iPad 2 might not be a better gift instead. Though it's larger and less portable than an iPhone, it's also available without a contract commitment to any carrier. A 64 GB Wi-Fi-only iPad costs $300 more than the on-contract 64 GB iPhone 4S, but that bigger $300 initial outlay also saves you over $1300 in carrier fees over the course of two years.

There's an iPhone for every budget now, from the free iPhone 3GS all the way up to the credit-card-slaying 64 GB iPhone 4S. As you go up the ladder the feature set expands along with the price, but the 16 or 32 GB iPhone 4S is probably going to be the sweet spot for most users. Regardless of which iPhone you give this holiday season, the person who receives it will almost certainly be very excited -- so long as he or she can afford the monthly service costs.