Will the iPhone 3GS Be Free on Contract?
Rumors about the iPhone 5 are multiplying like amphetamine-fed amoebas, and they're accompanied by other rumors that Apple will introduce a lower-priced iPhone. The latest, and perhaps most intriguing, rumor is that Apple will offer the iPhone 3GS for free on contract.
RBC Capital Markets General Manager Mike Abramsky put forth the theory in a note to investors, and it actually makes quite a lot of sense.
While the iPhone is about the same price as high-end Android smartphones (around $200) when purchased on contract, Apple is missing an entire segment of consumers that just take the best phone they can get for free with a contract. There are plenty of Android phones free on contract, but no iPhones. There's even a precedent for pricing down the iPhone 3GS; Apple offered it for $50 recently while keeping the iPhone 4 at traditional prices.
Abramsky says this plan could more than double Apple's potential customer base to 150 million, more than double what it is now. It would drastically increase app sales , from which Apple takes 30 percent of revenue, and increase the number of iPhone fans who are likely to purchase the next one .
Of course, this rumor raises several important questions. First of all, what happens to the iPhone 4? Most of the rumors have indicated Apple will let the 3GS go and start offering an "iPhone 4S." There's also the problem of connectivity in the 3GS. It only works on AT&T because there is no CDMA version of the iPhone 3GS. Verizon would obviously want in on the free iPhone offer in order to boost data contract sales.
But we won't know for a while yet. Current speculation puts the iPhone 5 launch sometime in September, possibly with a surprise announcement early in August .
