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In AT&T's (NYSE: T) end-of-the-year online refurbished phone sale, the wireless service provider is offering reconditioned iPhone 3Gs for just US$99 -- roughly half the cost of a new unit.
It's not the first time iPhones have dipped below $199. Just this weekend, the much-rumored Walmart iPhone debuted at $197 -- just $2 lower than the standard entry price for the 8 GB iPhone 3G.
Of course, the price of entry still comes with the two-year AT&T service contract with the mandatory $30/month data plan in addition to a voice plan. It should also be noted that while AT&T would prefer to nab all U.S. iPhone 3G hardware sales 
, it's a bit of a leap to say this is a competitive salvo lobbed at Walmart -- AT&T's refurb sale includes dozens of other mobile phone makes and models.
Ever So Slightly Used
AT&T's online refurb site says its rejuvenated units are lightly used or unused phones that have been returned by consumers within AT&T's 30-day trial period. Each phone, according to the carrier has been independently tested and reflashed with the latest software to meet new factory standards. They come with a 90-day warranty and 30-day no risk return policy.
In addition to the 8 GB model, AT&T is offering both black and white 16 GB models for $199 (regularly $299).
So, is this a great deal or not so much? Does the fact that these iPhone 3G units are "refurbished" cancel out the new lower price?
"This seems like an a new version of an old deal -- I bought a 4 GB phone in the first release for less," Ken Dulaney, a vice president of mobile and wireless research for Gartner (NYSE: IT), told MacNewsWorld.
"I think these are great deals," he noted.
Solid With Scratches
"Since most refurbished phones are units that were returned with the 30-day grace period for reasons having nothing to do with actual performance -- coverage or personal preference -- they can be a good deal, although it is not uncommon for refurbished units to have small scratches or other cosmetic issues," Avi Greengart, research director of wireless devices for Current Analysis, told MacNewsWorld.
"The reduced price point for a refurb will be attractive to buyers who are intimidated by the $200 new iPhone price point but want the phone enough to accept a refurbished device," Chris Hazelton, research director of mobile and wireless for The 451 Group, told MacNewsWorld.
"But the fact that the device is refurbished will serve to protect the $199 new device price point -- AT&T is using refurbs to appeal to more cost-conscious subscribers -- and still get them on a data plan," he explained.
Will New iPhones Drop in Price, Too?
The big question is whether the price of new iPhones will drop even more -- or at least below $100 for new iPhones in 2009. Will it happen sooner rather than later? The Macworld conference -- where Apple (Nasdaq: AAPL) first debuted the iPhone -- is set to hit in early January.
"Will you see this price point this year? Yes, I think you will," Dulaney said.
"I can see Apple reducing prices, but remember, everyone makes money on the $30 service, which is very high for most users on top of the voice plans. Also, a new $99 price point just after Christmas might make a lot [of buyers] angry -- many bought iPhones as a gift for Christmas," he explained.
"What AT&T needs is a capped lower service price. Not a lower-cost phone," he added.
If a sub-$100 iPhone isn't necessarily a given, what might need to happen to usher it along?
"Will there be a $99 iPhone in calendar 2009? The Apple rumor and speculation game is one I try not to play," Greengart said.
However, "It will depend on whether Apple is broadening its lineup, if Apple can cost-reduce its BOM [bill of materials], and if Apple feels it needs to respond to a poor economy with price cuts. Of course, the initial price point is extremely important, but it is not the only factor in determining affordability: the ongoing service costs quickly dwarf the cost of entry in just a matter of months," he added.
New Models First
"We will see a new generation of iPhone before any more price drops -- even Wal-Mart (NYSE: WMT) could only knock off $2 their iPhone offering. Apple is not a low-cost provider, and any cheaper product will be significantly under-powered -- like the iPod shuffle," Hazelton explained.
"I don't expect to see a non-refurb iPhone at $100 [because] Apple will roll out a new high-end iPhone -- ending the product life of iPhone 3G -- to maintain demand and drive current iPhone users to upgrade, much like the high-paced updates to iPods every 12 to 18 months," Hazelton added.
"I also don't expect Apple to offer an underpowered iPhone -- i.e. a Nano iPhone -- as iPhone is a premium brand, and Apple still sees strong demand for smartphones, which would only be undermined by an Apple 'feature phone,'" Hazelton said.
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