Free iPhone 3GS...With Contract Coming Soon, Says Analyst Report

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Phrases like “free iPhone” are huge attention getters, but it’s all the better when it turns out they might be accurate at some point, at least according to reports coming out of analysts at RBC Capital Markets. But as is generally the case with those huge attention getters, there’s a catch lurking below the surface.

At last report, RBC Capital Markets was pegging Apple as looking to offer up its older model iPhone 3GS as a free phone, but only if you took on a two year contract along with it. It would become what’s sometimes called a “subsidized phone”, in which they get you in the door with the powerful lure of a free and highly powerful phone, but then follow up said inducement by getting you to agree to a fairly long term contract, which gets them money over a much longer term.

Since the iPhone 3GS is reportedly set to be able to work with iOS 5, coming out later this year, it gives Apple a chance to get potential buyers in the door who might have gone the iPhone route, but were scared off by the normally substantial Apple price tags. Also it takes advantage of the hype around the (still said to be) upcoming launch of the iPhone 5.

It is, however, somewhat questionable just how valuable such a venture will be. Considering that a quick look at eBay for iPhone 3GS models showed ten auctions ending in the next hour with prices currently under$200, and match that against the total value of a two year contract, you might be better off to not take the big new phone and instead stick with a used unlocked model instead.

But chances are this will get some people interested who want that full iPhone experience without the full iPhone price tag. Are you one of them? Do you like the thought of a relatively cheap iPhone being made available just as the new iOS release is on its way? Head on down to the comments section and tell us what you think!