iPhone - Cool goes mass market

At yesterday's WWDC keynote speech Apple made an announcement that significantly changes its iPhone business model - by cutting the price of the iPhone 3G 8GB model (not the newer iPhone 3GS) to $99, the iPhone has just become a mass market cellphone.

While the new iPhone 3GS models still command a premium price ($199 for the 16GB model and $299 for the 32GB model), Apple has chosen to keep selling the older iPhone 3G 8GB handset at a reduced price of $99. Now, $99 is significant because, while it's not free, it certainly brings the iPhone into the mass market segment. Considering the hype that continues to surrounds this handset, the new price point will draw the attention of those looking to surf the iPhone wave but who weren't flush enough to be able to afford it before.

This is both a good thing and a bad thing.

It's a good thing because, as with all tech, there's a finite number of customers at each price point. What this $99 price point shows is that Apple now believe that the market is starting to get to the point where everyone who wants and iphone, and can afford one, already has one. While the iPhone 3GS will be attractive to those who have had an iPhone 3G for a while and who want to keep at the cutting edge (although those still tied to a contract will pay more for the handset ... the discounts are only available to new customers and those who have a contract that's close to expiring).

However, with a $99 price tag, the iPhone is no longer luxury or exclusive. It's mainstream. To make matters worse, the $99 3G iPhone looks identical to the $199 or $299 iPhone 3GS. That's got to erode a lot of the bragging rights associated with owning the 3GS. Some people like the exclusivity that a high price tag commands. It's the reason you don't find cheap Ferrari's and Rolex wrist watches.

This move is bound to boost sales, but I wonder if it will have a negative effect on sales of the higher-priced models.

Thoughts?