Apple, ATandT Drop iPhone 3GS Pricing to $49

Apple and AT&T are reducing the Apple iPhone 3GS to $49 beginning Jan. 7. Are the pair competing against bargain-price Android handsets, or also expecting a Verizon iPhone?

Apple and AT&T are dropping the price of the iPhone 3GS to just $49, beginning Jan. 7. The offer is available to new customers signing a two-year service contract and existing ones eligible for an upgrade, the pair said in a Jan. 6 announcement.

The iPhone 3GS is upgradeable to iOS 4, lets user talk and use applications at the same time, and can hop on any of AT&T's 23,000-plus WiFi hotspots.

"Combined with our new, lower monthly data plans beginning at just $15 a month, this new price brings even more value to one of the most popular devices in our leading lineup of smartphones," David Christopher, AT&T's chief marketing officer, said in a statement. "We're very excited for more people to experience iPhone on the nation's fastest mobile broadband network."

The new low price is bound to raise eyebrows-and speculation. Is this AT&T's last-ditch effort to secure as many subscribers as possible before competitor Verizon announces an iPhone of its own? Is AT&T simply clearing out stockroom shelf space before it turns on its LTE (Long-Term Evolution) 4G network? Or are the two making an effort to compete against the bargain-priced Android-running handsets newly flooding the market?

In November, T-Mobile, for example, introduced four Android-running phones priced under $100. Among them was the T-Mobile Comet, said to be the lowest-priced 3G Android phone in T-Mobile's portfolio, and the LG Optimus T (which the phone maker is showing off at the Consumer Electronics Show), priced at just $30 after a $50 mail-in rebate.

Giving credence to the Verizon theory, Piper Jaffray analyst Gene Munster said Jan. 3 that the probability of Verizon launching a CDMA (code division multiple access) version of the iPhone around March is 95 percent. Further, Munster expects Verizon to activate 9 million iPhones in 2011, accounting for more than a third of its total new smartphone activations.

Munster is hardly alone. Media outlets including The New York Times, The Wall Street Journal, Fortune and Forbes have all "confirmed" that a Verizon iPhone will be introduced during the first quarter of 2011. All that's missing now is confirmation from Apple or Verizon-which isn't likely until after CES.

Verizon CEO Ivan Seidenberg will be taking the stage Jan. 6 to deliver a morning keynote, but he's only expected to introduce a half-dozen smartphones, all essentially vying to beat out the Apple iPhone. The devices will likely all be compatible with Verizon's new 4G LTE network, and most if not all will run Android-if a Tweet from the Verizon Twitter account, comparing Android and LTE to chocolate and peanut butter, is to be believed.

The $49 Apple iPhone 3GS will be available at AT&T retail stores and the carrier's Website, as well as through Apple sales channels.