Will People Buy the Free iPhone or the $849 One?

In the past, a new edition of the iPhone usually was priced between $200 and $400, when married with a two-year 4G wireless subscription from AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ) or Sprint Corp. (NYSE: S). Older versions of the phone dropped sharply in price and often fell as low as zero. People who had unusual technical skills and did not want to be tethered to one carrier could get an unlocked iPhone for as much as $849.

Presumably, the new high-end iPhone (probably called the iPhone 5S) will be priced according to the pattern of all new iPhone releases. The new 64 GB iPhone will retail for $399. This smartphone will get a better processor than past models had, a better camera and probably fingerprint-based security. Less potent versions of the iPhone 5S will be priced as low as $199. In the wake of the release of the new iPhone, prices on earlier versions will drop immediately.

However, Apple will release a new “cheap” iPhone next month as well. Based on most accounts, the smartphone will be tacky plastic. Dubbed the “iPhone C,” the product may be aimed at emerging markets and may be underpowered by the standards of recent models. No one much outside of Apple knows if it will be sold in the United States as well. No matter what the target markets are, the price point will have to be low. The threat a cheap phone will cannibalize expensive iPhones is relatively high, but Apple has to take some of the bottom end of the market to keep increasing global unit sales. For the sake of an argument about Apple’s future, the iPhone C will retail for $99.

As usual, carriers will offer the most ancient iPhone versions for free to trap value shoppers into two-year commitments. There will be an unlocked edition of the newest iPhone as well. Perhaps the rumored iPhone 5S gold-covered edition, unlocked, will only be available for more than $1,000.

All that leaves consumers with a choice — a free iPhone, refurbished iPhones, one new model for $99, one for $199, one for $399, one for $849, and perhaps one that is even more expensive because it is made with real gold. All of that from a company that used to release one product at a time, and each time with price points locked down so tight that neither consumers nor carriers could change them.