Apple fans around the country are foaming at the mouths over the jacked-up pricing AT&T has announced for the upgraded iPhone. AT&T apparently can’t afford to subsidize the phones for existing customers, because if you currently have an iPhone and more than 6 months left on your contract, you’ll have to pay $417-$517 for the newer model (that includes an $18 “upgrade” fee).

If you’re a new customer, consider the Palm Pre instead. Since AT&T didn’t announce a lower data plan yesterday, the Palm Pre is more affordable on a month-to-month basis. It’s hard to compare the 3G S and the Pre side by side because their features don’t match up, but basically if you want auto-focus and the ability to record video, you want the 3G S; if you want a physical keyboard and the ability to multi-task, the Pre is a better bet.

Your other option, of course—if you can’t or don’t want to jump ship to Sprint—is to take a deep breath and wait it out. The introduction of the Pre is a great thing for customers, and it’s still possible AT&T may drop the price of its data plan for the iPhone in the coming weeks. Prices for either phone may drop further depending on sales. And if you’re a current iPhone 3G owner, the free OS upgrade later this month should make you feel like your existing phone just got a tune-up, which may hold you over for another 6-12 months until, hopefully, prices fall. In the meantime, apps like Quick Shot and Reply Butler can bring some added functionality to your existing iPhone 3G at nominal cost.

(And of course, don’t forget Android phones. The OS is awesome, even if the $179 G1 phone on T-Mobile is a bit clunky.)

“Real Cost of iPhone 3GS: About $218 More Than You Think” [Gizmodo]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.