AT&T Raises Subsidized iPhone 3GS Price to $0.99

23rd November 2011

In a curious move, AT&T has raised the subsidized price of its cheapest iPhone to $0.99, up from free.

When the iPhone 4S was announced in October, Apple specifically mentioned in its press release that the iPhone 4 and iPhone 3GS would be available in 8GB capacities for subsidized pricing of US$99 and for free, respectively.

During AT&T’s Q3 2011 earnings call with analysts on October 20th, AT&T Mobility CEO Ralph de la Vega twice mentioned the iPhone 3GS’s $0 price point, saying during the introductory remarks:

Our lower price plan continues to be a good entry point for many subscribers and now that we offer a free iPhone with a 2-year contract for the first time ever, the iPhone 3GS, we expect to broaden the smartphone base even more.

De la Vega again mentions the 3GS during question-and-answer portion:

I also mentioned in my notes that we have another device that I think is going to dramatically change those people that are on smartphones and quick messaging devices, the 3GS, which is free with a 2-year contract. We’ve seen a tremendous, tremendous demand for that device even though it’s a generation old. And actually, we’re getting more new subscribers coming on the 3GS on the average than other devices.

It is unclear why AT&T has elected to raise the price of the iPhone 3GS by a negligible but still notable amount a month and a half after it became free on contract, particularly given the fact that both Apple PR and AT&T Mobility’s CEO had specifically touted the free nature of the device. In response to a request for comment on the price increase, AT&T declined to offer a specific reason:

iPhone 3GS is still available at an incredibly low price and we’re confident consumers will agree that this remains one of the best deals for a leading smartphone.

For its part, Apple continues to offer the iPhone 3GS, subsidized on AT&T’s network, for $0.00 on the Apple Online Store.

Update: MacRumors forum user Metcury46l had one possible explanation for the price change: I work at AT&T, this is being done to help prevent fraud as the 99 cents cannot be billed to your bill. It must be charged to a credit or bank issued debt card. Fraudsters are using stolen identities to steal these handsets … been an issue since they went free.