The $99 iPhone 3G: Apple's Most Significant Announcement

CIO.com –

On Monday, Apple pulled out all the stops at its 2009 Worldwide Developer Conference (WWDC), introducing additions and enhancements to its operating system, Mac OS X, the MacBook Pro laptop line, as well as a brand spankin' new iPhone. But it's not the new iPhone 3G S, Snow Leopard or the beefed up MacBook Pros that really piqued my interest...it's the old iPhone 3G, which Apple is now selling for less than $100. And here's why.

Apple products are Expensive--yes, with a capital E. Everybody knows that. If you want a MacBook, you've got to be willing to pay more for it than, say, a comparable HP or Dell notebook running Windows. Want a cool matching Apple display to go with it? Sure. But it'll cost ya more than double the price of a similarly-sized ViewSonic or LG LCD. In fact, this "gouging" is actually part of Apple's sales strategy; the company knows its products are a sort of status symbol.

My point: With Apple, you gotta pay to play. That's just the way it is, right?

Nope, not any more...at least when it comes to iPhones. Apple's decision to drop the 8GB iPhone 3G price from $199 to $99--the 16GB version will also get a price reduction from $299 to $149--represents an unprecedented move from the Cupertino crew. A $99 iPhone is actually affordable. Furthermore, the price is comparable--competitive even--with offerings from the other handset heavies, like BlackBerry-maker Research In Motion (RIM).

To sum that up, Apple is now out-pricing some of its competitors...in a sense. RIM's "entry-level" BlackBerry is currently the Pearl series, both the 81xx and 82xx families of devices. The Pearl 81xx has been around since 2006, and on average, it sells for $99 through AT&T. The Pearl 8220 Flip, which was introduced late last year, also goes for about $100 via T-Mobile. Suddenly, Apple also has an entry-level player...and a damn fine one, at that. Frankly, the iPhone 3G is now one, if not the, best "beginner" smartphones available, in this humble blogsmith's opinion. I'm a BlackBerry lover through and through, but faced with a choice between the iPhone 3G, a Pearl 81xx or a Pearl Flip 82xx, I'd probably pick the iPhone, because I can't stand RIM's SureType keyboard, which both Pearl devices have.

This is a drastic strategy shift on Apple's part, but one that the company needed to make to truly dominate in the U.S. smartphone space. That's because average consumers who don't currently use smartphones are the largest untapped market segment, the biggest slice of the pie, if you will.

And the $100 mark is the sweet spot for that crowd. RIM knows it; Microsoft knows it; and Apple knows it. Sure, data plans for the iPhone still cost more than the simple voice plans required for your average feature phone, or "non-smartphone." But now that the device itself is more accessible, those higher data plans seem more palatable.

What's more, Apple may very well have triggered the death knell on Palm's Pre, which just hit U.S. store shelves last Saturday. Palm's counting on the Pre to pull it out of the gutter--read: financial ruin--and though I don't think any one device could realistically have such an effect, the Pre could have represented a few solid steps in the right direction.

But now...now consumers can buy an iPhone for half the price of the Pre&and that just may be enough to bury Palm for good.

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