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Apple to Offer Free iPhone 3GS When iPhone 5 Hits the Market?

As you all know, just last week, we didn't have any shortage of Apple hardware news and rumors especially with regards to the company's next smartphone offering, the iPhone 5. In more or less 2 months, if the rumors turn out to be accurate, the iPhone 5 shall be announced by the Cupertino giant. As the impending announcement of the next iPhone approaches, it is somewhat surprising that we'll be getting rumors that concerns an older hardware, the 2 year old iPhone 3GS.

iPhone 3GS for Free
According to an analyst from RBC Capital Markets named Mike Abramsky, as the iPhone 5 launches, Apple will be offering the iPhone 3GS for free under a two-year service contract. The iPhone 3GS is no doubt showing its age thanks to its outdated hardware specs and it is only a matter of time before Apple completely stops support for the aging mobile device. But Apple may have just found a way to expand the market for iPhone by letting those who have yet to experience the device for no upfront cost.

While a $49 iPhone is already available (AT&T), psychologically a $0 iPhone provides a compelling offer," Abramsky wrote in a note to investors. "Proprietary survey data... suggests 14% are very/somewhat likely to buy the iPhone 3GS for free with 2-year contract, exceeding buying interest for the iPad (13%) and original iPhone (9%).

When the iPhone hit the market last year, the iPhone 3GS was offered for $99 under carrier contract, a $100 lower when it was originally sold back in 2009. And just this year in January, the iPhone 3GS price was lowered once again and it is now offered for a mere $50. According to Abramsky, offering the 3GS for free is not only a good opportunity for Apple to double its potential market but it would also increase global share. Not to mention the fact that this could also help counter the growth of Android.

In May it was revealed that the iPhone 3GS, along with the first-generation iPad, often outsells many newer Android-powered devices. It was noted that older products can offer Apple an aggressive tiered pricing strategy that can help ward off competition.

iPhone 3GS White
But still, if you look past the word "free", then you will find out that this free iPhone 3GS may not really come for free at all. If you take into the account the 2 year service contract, things may not turn out as rosy as it looks. You have to keep in mind of course, that there's the contractual cost and cancellation fees (which is commonly steep) if they want to terminate the contract.

But as Abramsky had pointed out, an iPhone for seemingly no cost at all will surely attract many consumers. This is especially true for those who have been wanting an iPhone for ages or those who doesn't care that they will be owning an outdated hardware.

Unlike with past old hardware, Apple usually stops supporting a device once it hits its two-year life cycle. But such is not the case with iPhone 3GS. Everyone was expecting that support for the 3GS will be dropped once the iOS 5 launches along with the announcement of the next iPhone. But back in WWDC 2011, Apple announced that the 3GS will be fully supported in the next version of the iOS. There were users who tested the 3GS on the iOS 5 and aside from some missing features, the aging device runs on the operating system rather well.

Predictions from analysts are not exactly the most accurate and unless they claim that they have a credible source, then their predictions can only be passed as speculations. The aging hardware of the iPhone 3GS makes it an unlikely candidate for future support. If Apple will offer them for free, then they will have no choice but to include support for it in future software updates which is actually more difficult than it sounds due to hardware constraints.

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