Mike Abramsky, RBC Capital Markets General Manager, has told investors that Apple is planning to reduce the cost of the iPhone 3GS to $0 on contract following the release of the iPhone 5. There are still rumors that Apple will be releasing a low-priced iPhone with 4th-gen hardware, but the 3GS price reduction could just be a way for AT&T to clear out inventory and combat Android sales. As noted by BGR, Verizon does not offer a 3GS, so AT&T will have the upper hand with budget conscious buyers.
An 8GB 3GS is currently $49 with a 2-year contract. Refurbished units can be had for just $19, and AT&T offers baseline data plans for $15 per month. At this point, there really isn’t much reason for anybody to purchase a dumbphone.