my advice is (and i say this as a person who wants an iPhone desperately) - just hold out. as soon as the release hits, the ads on TV will not be as common, and while you'll still see ads everywhere, it'll cool.. and the crazy desire to possess one will slacken. and the urge will pass. just keep thinking about the fact that the cheaper one is $500. Believe me.. I understand you're inescapable desire to own one today.. to hold it; caress it; slip it ever so slightly into your pocket...
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but you must resist. remember that you have a perfectly good phone now.. that works perfectly well. Remember that all the ads about internet are misleading, since unless you're in an area with a wireless access point (like a home, or cafe), that you're internet will STILL be as slow and almost useless as current cell phone internet. Remember that just like the iPods, the iPhone will be a lot more accessible in a year or so.. you might even be able to get a refurbished one for a 100 or 200 less, like you can with iPods now.
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just resist... just resist the overpowering urge to pay $500 for style and advertising.