Just a day before Verizon Wireless is expected to announce the iPhone 4 on its network, Apple, AT&T, Target, and Best Buy have cut the price of the 8GB iPhone 3GS to $49 (with a two-year contract).
This seems to be a permanent price drop rather than a quick sale to unload inventory. In typical self-congratulatory fashion, Apple's iPhone 3GS product page says the phone "starts at an amazing new price" and "takes advantage of all the great features of iOS 4."
The iPhone 3GS has half the screen resolution (480 by 320 pixels) of the iPhone 4, as well as a weaker battery and camera (3 megapixels). The iPhone 3GS also has no front-facing camera and no flash on the rear-facing camera--but now it's $150 cheaper than the 16GB iPhone 4.
This price cut could be a play by Apple to squeeze out more sales on AT&T's network while reaping a harvest of new customers from Verizon. AT&T has braced itself for Verizon's alleged announcement by arguing that it has a faster network than Verizon, but a budget offering could also help AT&T attract new buyers in the face of competition. It seems unlikely, but not impossible, that Verizon will carry the iPhone 3GS.
Verizon rumors aside, the budget iPhone also gives Apple a way to compete with low-end or legacy Android smartphones. Verizon, for instance, sells pre-owned original Droid phones for $50 on contract. Motorola's Backflip also sells for $50 with AT&T.