Free 3GS, Lower Prices Will Help iOS’ Reach Among More Mainstream Consumers

Apple may not have introduced any ground-breaking new features today in its next-generation iPhone, the 4S. But its move to lower prices across the board should help older models of the iPhone stave off Android’s momentum a little bit.

Apple said that the iPhone 3GS will now be free with a contract. Last year, the oldest model the company retailed started at a price point of $99 with a two-year contract. With the platform facing a wave of sub-$50 or free Android devices on contract, Apple risks seeing its smartphone market share decline in the U.S. and abroad.

While the iPad and iPod are helping keep the iOS installed base higher than Android’s globally, the platform now lags behind Android in terms of smartphone subscribers in the U.S., according to comScore.

Android had a 41.8 percent market share of U.S. mobile subscribers to Apple’s 27 percent share. Android is activating at least 550,000 devices per day now and likely is close to, if not more than, half the size of iOS’s active installed base at this point globally.

(I’m assuming this based on Google’s report in May that it had 100 million device activations plus the platform’s current activation rate, and Apple’s announcement today that it has cumulatively sold 250 million iOS devices. One can also look at Facebook smartphone clients and see that Android app has 67.5 million monthly actives to the iPhone app’s 91.2 million monthly active users.)

Sprint, which had more than 52 million subscribers at the end of the second quarter, should also add a small boost to the platform.