Originally Posted by blackbook
The current 3GS can run iOS 5 as is, and Apple won't give up their 70% margins, so don't expect an iPhone 4 in an iPhone 3GS package for "free."
Just to be clear, Apple typically has 30% to 37% profit margins. I know not what margin you are quoting. The margin number along with the ASP are key as you can easily derive revenue and profits from knowing units shipped.
Best case scenario (and my hope) is for an updated processor (maybe a new distinction like A3 to differentiate from iPhone 4?), front camera for facetime, a dual mode cellular radio for availability on all major US carriers, and a new case. The 3GS case design is now 3 years old and shouldn't be used again for another year. Give us a fresh design keep the plastic back sell it for $399 unlocked/free with data plan (in US) and they'll have a winner.
The best case scenario to me are the carriers selling a data only contract for handhelds, where we essentially buy the data with no time limits. The iPad month-to-month a la cart data deals are nice, but you are really only buying service time (month-to-month) with data caps each monthly period.
I'd like to just buy the data. I buy 500 MB, I should be able to use that in 1 day or 100 days. The cost is still the same. If I need more I buy more.
This will give OEMs a lot more freedom in the business models and essentially drive down the cost of handsets. Apple can basically just sell an iPhone line, contract-free, with models varying from $300 to $800 or more. If I need voice, the carriers can provide a VOIP service or I can go with some other VOIP service. And it should be any device, not just phones: computers, PMPs, TVs, cars, phones, game consoles, portable game devices, GPS units, etc.
Of course, no carrier really wants to do this as they think it turns them into a no growth utility.
As for an iPhone lite: take 8GB iPod touch 4th gen, give it 512 MB total RAM, and add phone parts including Qualcomm Gobi dual GSM-CDMA radio. Change the back to cheaper, but rugged plastic, change front to rugged thicker glass. Call it a day. It'll be thicker and heavier. Sell pre-paid or no-contract for $399. I'd like to have 16 GB storage, but given a choice between 512 MB RAM, 16 GB storage, IPS display, better cam, I'd always go for the RAM and trade other features.
The regular iPhone can have the A5, 8 MP BSI cam, HD Facetime cam, LTE, 32-64 GB storage, larger 3.7" to 4" IPS 960x640 screen, 802.11n, 1 GB RAM, etc.
Still, as many have mentioned, you're still paying $80/mo for two years in the USA for about $2000 in service costs. $200 is pretty small compared to that. For an extra 10% in "TCO", one is getting a device that is something like 2x better. No-brainer.
The math simply doesn't work out for "free" handsets so long as the carriers maintain a subsidized phone + multiyear contract model. I can see the AT&T 3GS selling a lot because they sell a $15/mo data plan, but still, it's not that much of a savings. It may work better if carriers don't require a data plan, but still, I don't even want to get into how voice is so expensive.