Sure it's "last year's model" in many ways, but a week ago it was still the best iPhone on the planet, holding up extremely well to much newer devices running other operating systems on other carriers. Now it packs iOS 4 punch with multitasking, folders, unified and threaded email, and all the other bells and whistles, and it's $99.
It makes absolutely no sense when you consider the costs of the accompanying voice and data plans under a 2-year contract run into the thousands of dollars, but getting below the magical $99 price point smashes a huge psychological barrier.
It also means Apple has something beyond competitive again in the budget $49-$149 smartphone space. For new entrants into the market wanting to upgrade from a feature phone (and quite possibly an iPod touch) to non-geeks of all kinds who just want a music, internet, and app phone, its going to be hugely appealing.
Since the iPhone 3GS shares the same basic design as iPhone 3G, accessory makers get a 3rd year on the market for their skins, cases, molded docks and chargers, and other accessories -- unprecedented in the modern smartphone space. More and more accessories will no doubt start targeting iPhone 4, just like a handful of apps are iPhone 4 only now, but a new iPhone 3GS owner will still find 225,000 apps and a mountain of gear available to them. Ad to that the integration into the rest of Apple's ecosystem, everything from iTunes media to Apple Store customer service, and appealing rapidly becomes compelling at the $99 price point.
And here's the one more thing -- unlike the iPhone 4 right now, it's available in many, many countries internationally, and unlocked in most of them outside the US. So, while a cheap, carrier subsidized iPhone 3GS is an option, so is a CAN$549.00, AUS$719, £419.00, €519.00 officially SIM-free, unlocked iPhone 3GS. It's an expensive option to be sure, but for those who hate contracts or love to travel, its cheaper than an iPhone 4 and around the same price as an unlocked Nexus One. That might also appeal to developers who want a second iOS phone but not the contract to go with it.
Apple launched two new smartphones last week and even though iPhone 4 sucked all the air out of the coverage, the $99 iPhone 3GS 8GB is just as important in its own right.