I’ve seen many reactions to the WWDC keynote that characterize the iPhone as something less than a compelling upgrade (while bemoaming the price of said upgrade) and pointing to the new $99 price of the original 8 GB iPhone3G as the bigger news out of WWDC. The entry-level iPhone is poised to be an aggressive challenger to many competitors, but some argue that it may be too aggressive against the iPhone 3G S.
I agree that the improvements in the iPhone 3G S are not as dramatic as the ones we saw in the move to the iPhone 3G, but the app ecosystem will add value to video capture on the new model. The extra $100 for the 16 GB 3G S is not a lot when amortized over the cost of a two-year AT&T agreement. And then there is AT&T’s 7.2 Mbps network upgrade, which could make the iPhone 3G S much faster at network operations in addition to local operations.
Regardless, Apple does very well with premium products. The 16 GB nano does quite well despite there being 8 GB models; it’s long been that way with higher iPod capacities. And especially with the iPhone, it’s in Apple’s long-term interest to accept some cannibalization of the high-end now in the name of extending the platform. I was surprised, for example, to see that there were already 5,000 Android apps and that the platform is accounting for 9 percent of mobile Web traffic according to charts that were presented at WWDC. Apple may lead in the smartphone app race, but it’s a long way to the checkered flag.