American iPhone users have been quietly biding their time until Apple ends its exclusive contract with AT&T, hoping for better service, cheaper phones and lower monthly bills. But if the iPhone situation across the pond serves any example, those things aren’t likely to happen any time soon.

Starting January 14, Vodafone is set to start selling iPhones in the U.K. But the company’s cheapest deal will end up being more expensive over the lifetime of the device
than anything currently offered to iPhone users. That’s bad news for consumers who expected a little competition would make the iPhone more accessible to users.

O2’s exclusive contract to sell the iPhone in the U.K. ended in November. The difference betwen O2’s prices and those at Orange, who also now sells the iPhone, is only 84p.

Forced to wait until January to start selling the smartphones, Vodafone has missed out on the Christmas rush. And the company is not planning to undercut its rivals to win customers. According to The Telegraph, Vodafone’s cheapest offer will cost £899 over the life of the phone, more than both O2 and Orange, the company that started selling iPhones in November. And while competitors like super market chain Tesco offer plans for as litle as £20 a month, the headset costs £320 to purchase upfront.

But even if Tesco really undercut the phone companies, many consumers are still willing to pay for connectivity stability. Like AT&T in the U.S., Britain’s O2 has had data issues, including two crashes in recent months that left users unable to make calls or connect to the Internet.

And that’s really where the issue hits home in the U.S. As Saturday Night Live noted this week, it’s commonly agreed that the iPhone gets terrible phone service:

Verizon has been happily running ads touting the failures of AT&T’s 3G data coverage, but it looks like AT&T may not be so bad after all. According to Gizmodo, AT&T has the best 3G service out of any national providers here. That’s bad news for consumers hoping another provider would be able to support the phone better.

This gets to the unfortunate reality that as more carriers start offering the iPhone, they might offer fewer subsidies, instead of more. Which means that the iPhone could cost closer to its $600 street value than the $199 that AT&T currently offers it for.

As users become more device loyal than network focused, it doesn’t make sense for carriers to eat headset costs. They already have to tie consumers into lengthy contracts to guarantee they will recoup headset costs with monthly charges. But once consumers have finished their contract (and often before), they’re off in search of the newest, most exciting device.

Another option is to make contracts excessively long, which could guide users into paying exit fees more often to get a new phone. In Europe, where iPhone contracts run 2.6 years, that option doesn’t sound so far fetched. But either way, this is not exciting news for consumers hoping to pay less for an iPhone in the near future.

A more likely way for the iPhone to get cheaper is through smartphone competition. If Google can sell the Android for significantly less money, it would be in Apple’s best interest to subsidize the price of its handset instead of waiting for phone carriers to do it.

Image: CNET UK