iPhone 3G: Apple Re-Invents the $99 Budget Smartphone

iPhone 3G $99

There's a "budget" smartphone category that has so far revolved around devices like the Palm Centro, BlackBerry Pearl, and a host of Windows Mobile devices like the Samsung Jack -- basically scads of devices aimed below the fat wallets of enterprise.

Typically these devices are small to the point of being cramped, with tiny keyboards or work-arounds like T9 or SureType, and are low-margin for manufacturers -- sold more to grab new users, bolster market share, and create brand awareness than to serve as mobile computers for the internet age.

Well, Apple has just shot a cannonball through the heart of that smartphone category -- the iPhone 3G at $99.

At least that was our editor-in-chief, Dieter Bohn's reaction when we spoke following the big WWDC 2009 Keynote. And I think he's right. Here's why:

Come next week on AT&T (and Rogers and other carriers that match the price point), for $99 you'll be able to get a full-on 8GB iPhone 3G running iPhone 3.0 software.

That's not an iPhone nano or mini, not a stripped down, poorly built, cramped, barely functional budget smartphone, mind you, that's the same phone that until last Monday's WWDC Keynote was arguably one of the most advanced mobile computers on the planet. It's the lower storage version of the hardware that shipped over 10 million units and has 50,000 apps ready to run. Never mind Apple branding and a super-slick user experience.

For $99.

Whether or not the price point remains, or it lasts only as long as current supplies, this has to send Palm, RIM, HTC, and others into panic mode. Palm, for example, has show quarter after quarter losses on the Centro even in the budget category, and Apple will still be making margins on the iPhone 3G.

Will this put downward pricing pressure on next generation devices like the Centro-replacement, webOS-powered Palm Eos? Will it force RIM to offer BlackBerry Tour-like features at Pearl-sized prices? And even if they do, with multiple form-factors and networks at play, can they achieve the economies of scale and maintain realistic margins at that price point? For companies like Palm, whose financials are still shaky at best, these become critical questions.

Which brings us to the elephant in the budget smartphone room:

If Apple is selling the iPhone 3G at $99, what does that do to premium devices like the Palm Pre, BlackBerry Bold, HTC Touch Pro 2, etc.?

Certainly not everyone, but just as certainly some budget-conscious people who were considering a new premium smartphone might just decide to save themselves a hundred -- or several hundred -- dollars and get an iPhone 3G at $99 instead...

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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