Apple Unveils iPhone 3GS, Cheaper iPhone 3G

new iphone Ending months of fevered speculation, Apple Monday announced a faster new video-centric version of its iconic smartphone dubbed the iPhone 3GS, and halved the price on its existing 8GB iPhone to $99.

The new 3GS -- featuring an autofocus camera and video-recording as well as a host of added features in the upgraded iPhone operating system -- will hit store shelves June 19, and will sell for $199 for the 16GB model and $299 for the 32GB one.

Unveiled at Apple's Worldwide Developers Conference Monday, the next-generation iPhone aims to raise the bar for smartphone competitors such as Research In Motion and Palm while undercutting them on price at the low end of the iPhone line. The move follows on the heels of Sprint's Saturday launch of the Palm Pre, the latest iPhone challenger, priced at $199.

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"Ninety-nine dollars sets a new price point for a new, premium touchscreen phone, and Apple is showing it's completely in charge of smartphone industry pricing at large," said Avi Greengart, research director for consumer devices at technology research firm Current Analysis.

Philip Schiller, Apple's head of product marketing, who was involved in the iPhone presentation at the conference, said in a statement that the lower-priced iPhone 3G would put the device into the hands of even more users who want them. Already, Apple has sold some 40 million iPhone and iPod touch devices and carved out a nearly 11% share of the worldwide smartphone market, according to Gartner.

Apple founder and CEO Steve Jobs, who has been on medical leave since earlier this year, was rumored to possibly show up at the event. He didn't make an appearance, but the company recently announced that he's expected to return at the end of June. Bloomberg News also reported that Jobs had been actively involved in preparations for the conference.

Apple in March announced the 3.0 updated operating system boasting 100 new features, including the ability to cut and paste text, use MMS messaging and receive "push" notifications. Another key change was allowing developers to sell subscriptions to their iPhone applications -- and follow-on content -- through a new In-App Purchase feature linked to the iTunes Store.

During the keynote presentation, Scott Forstal, Apple's senior vice president of iPhone software, highlighted those and other new features including Internet tethering via a USB or Bluetooth connection and a "remote wipe command" that lets users delete all data if their iPhone is lost or stolen.

Several new 3.0 OS apps were also showcased -- including e-book reader ScrollMotion, which lets users make in-app purchases and has deals to offer 50 magazines, 70 newspapers and 1 million books through the service. Amazon's Kindle app for the iPhone, by comparison, offers 240,000 titles and requires users to go to Amazon.com to buy books.

"In-App purchases are going to be huge for developers," said Jonathan Zweig, founder and CEO of EpicTilt, which develops game apps for the iPhone. "For instance, in our upcoming game 'TapStar,' a music rhythm game with superstar artists, we'll eventually be adding the ability to purchase levels from new artists within the app."

As with upfront app purchases via the App Store, Apple will take a 30% cut of in-app transactions. With 50,000 apps in stock and more than a billion downloads to date, Apple intends to maintain its big app advantage against an onslaught of new mobile storefronts from rivals including Palm, RIM, Microsoft and Google.

With the popularity of its apps and smoother Web browsing experience, the iPhone has also made it a leading platform for mobile advertising. Apple said Monday that the device alone accounts for 65% of mobile data usage.

While the iPhone accounted for only 8% of the smartphone market, it generated 43% of mobile ad impressions (including from apps) in April, according to recent data from mobile ad network AdMob. "We're excited to see the growth in advertising that the new iPhone 3GS and the $99 iPhone will bring to the industry," said Jason Spero, the company's vice president and managing director.

Current Analysis' Greengart said he expects the iPhone 3G price-cut, which had been rumored leading up to the WWDC, to put pressure on competitors. He noted that over the weekend, the price on the BlackBerry Bold had already been dropped from $299 to $199.

Even for BlackBerry models like the Pearl and Curve that already sell for as low as $99, the cheaper iPhone 3G creates a problem, since they don't offer the same range of features. "That's where RIM will feel the pressure," noted Greengart.

Meanwhile, the iPhone 3GS (the "S" stands for "speed") has enticements for higher-end customers including the 3-megapixel camera with a "tap to focus" feature, video shooting and editing, and built-in voice control for things like playing music. Apple says a faster processor will load most apps three to five times faster.

Schiller also touted the phone's improved battery life, providing up to nine hours of Internet surfing, 10 hours of video, and 30 hours of audio. His presentation was capped by the debut of the new iPhone 3GS ad titled "Break In" developed by TBWAMedia Arts Lab that riffs on the CIA robbery scene in the 1996 movie "Mission: Impossible." Instead of a secret data file, the 3GS is the target of the heist. Of course, Apple is hoping that most people simply buy it when it comes out next week.

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