The sticker price on Apple’s (AAPL) iPhone — once an formidable barrier to widespread adoption — is falling faster than Sarah Palin’s approval ratings.

• When it first hit the market two years ago, the 8GB iPhone cost $599.
• Two months later, to the dismay of early adopters, it dropped to $399.
• Last July, an iPhone 3G with 8GB sold for $199.
• In June, with the launch if the 3GS, Apple dropped that price to $99.
• Now AT&T (T) will sell you a refurbished 3G for $79 — which is, as Edible Apple points out, 87% off the price of the original 8GB iPhone.

Of course, most cellphones eventually sell for $0.00, fated to become loss leaders for carriers that make their real money locking users into long-term contracts.

Indeed, the price cuts on the iPhone have helped shift the focus from the (heavily subsidized) sticker price to the real cost of ownership: the two-year AT&T contract that starts at $74 a month for unlimited data and 200 text messages.

At that rate, a $79 iPhone will cost you a minimum of $1,885, before taxes and surcharges.

Refurbished iPhones, according to AT&T, “are previously owned devices that have been unused or lightly used and returned during the 30-day trial period.” They come with a 90 day warranty.

If you’re still interested, check out AT&T’s offer here.

UPDATE: Reader CdnPhoto from Toronto points out that Canada’s Fido is offering a “refreshed” 8GB iPhone 3G for $49 Canadian (about $42 US). The catch: it comes with a 3-year contract. Here’s the link: http://fido.ca/web/page/portal/Fido/iphone.

The U.S. government agencies in charge of policing antitrust violations — long dormant under the Bush administration and newly revitalized under Barack Obama’s — seem to be circling closer to Cupertino.

According to a report Monday in the Wall Street Journal’s online edition, the Department of Justice has begun an initial review of the U.S. telecommunications industry to determine whether the two dominant players — AT&T (T) and Verizon (VZ), which together control 90 million U.S. landlines and 60% of the country’s 270 million wireless subscribers — are abusing the market power they have amassed in recent years.

Although not a primary target of the probe, Apple (AAPL) could get ensnared in it, according to the Journal’s report.

“Among the areas the Justice Department could explore,” writes the WSJ’s Amol Sharma, “is whether wireless carriers are hurting smaller competitors by locking up popular phones through exclusive agreements with handset makers, according to [people familiar with the matter.] In recent weeks lawmakers and regulators have raised questions about deals such as AT&T’s exclusive right to provide service for Apple Inc.’s popular iPhone in the U.S.”

The same sources suggest that the DOJ could also review whether telecom carriers are unduly restricting the types of services other companies can offer on their network. The features provided by the iPhone’s 50,000 apps are a key competitive advantage over its rivals.

“Antitrust problems with telecom consolidation have been evident for a while — it’s not just wireless,” says Gary Reback, an antitrust attorney at Carr & Ferrell in Palo Alto, Calif., and author of the famous “white paper” that laid out the antitrust case against Microsoft (MSFT) in the 1990s.  “There has been a lot of public opposition to the consolidation, but the Bush Administration just shrugged it off.”

This is the second time this spring that Apple’s name has come up in a federal antitrust probe. In May the New York Times reported that the Federal Trade Commission had begun an inquiry into whether the ties between the boards of directors at Apple and Google (GOOG) could violate antitrust laws.

The companies share two directors — Eric E. Schmidt, chief executive of Google, and Arthur Levinson, former chief executive of Genentech.

Apple has also caught the eye of the Securities and Exchange Commission, which investigated — and ultimately exonerated — Steve Jobs for his role in the options backdating case. The SEC is also reported to be looking into whether Apple was sufficiently forthcoming earlier this year about the severity of Jobs’ health problems.

Asked for comment on the report of a DOJ probe, an AT&T spokesman wrote:

“We are not aware of any formal investigation by the Department of Justice, nor have they asked us to provide any information. The U.S. wireless industry is highly competitive and, as a result, delivers terrific innovation, many choices and attractive pricing for all customer segments.”

AT&T’s (T) widely leaked “best-ever sales day” memo ticking off the records set on June 19, 2009 — the day it began selling the iPhone 3GS — is packed with superlatives but notably lacking in numbers. (See memo below.)

Unlike Apple (AAPL), which reports on a quarterly basis how many iPhones it has shipped, AT&T keeps its unit sales figures close to its chest.

The new memo trumpets the fact that iPhone sales on June 19 “exceeded sales recorded on 2008’s iPhone launch day,” without saying how many phones it sold on either day.

But by extrapolating from previous quarters and reading between the lines, we can make some rough estimates. Here are the data points as we understand them:

• June 29 and 30: Apple launches first iPhone, and AT&T and Apple together sell 270,000 units in two days.  In its Q2 earnings call the next month, AT&T CFO Rick Lindner says his company activated 146,000 iPhones in the last day and a half of the quarter.
• Oct. 2007: Apple announces that it has sold a total 1.39 million iPhones; AT&T says it has activated 1.1 million of them.
• Jan. 2008: Apple says it has sold 4 million iPhones; AT&T says it has activated about 2 million (sparking much hand-wringing about the “missing” 2 million iPhones)
• July 11, 2008: Apple sells more than 1 million iPhone 3Gs in 21 countries over the space of three days. AT&T later says its stores sold nearly twice as many iPhones that weekend as they did the weekend of the first iPhone launch. Even if AT&T’s sales equaled Apple’s, that can’t be more than 270,000.
• Oct. 2008: Apple announces that it sold 6.9 million iPhones in its September quarter. AT&T says it activated 2.4 million of them, about 35%. (Overseas sales and unlocked iPhones presumably making up most of the difference.)
• Jan. 2009: AT&T says it activated more than 4 million iPhone 3Gs in the previous six months. In that period, Apple had sold 11.25 million iPhones. Again, AT&T’s activations represent about 35% of the total.
• June 2009: Apple launches the 3GS and again sells more than 1 million iPhones in the space of three days, but this time in only 8 countries, not 21.
• July 2: AT&T’s memo says it sold more iPhones over the June 19 weekend than it did over the July 11, 2008 weekend. That makes sense, given that the U.S. (and thus AT&T) share of Apple’s sales was larger this year.

Assuming the 35% ratio holds up, it’s not unlikely that AT&T will eventually activate about 350,000 of the new iPhones sold the weekend of June 19 — many of them Apple Stores — and that actually unit sales at AT&T outlets that weekend could easily exceed 300,000.

AT&T’s public relations department announced that it sold “hundreds of thousands” through its pre-order process prior to launch, and would say no more.

Photo courtesy of AppleInsider.

Below the fold: The iPhone portion of the AT&T memo, as leaked to MacDailyNews.

I’d heard about this new iPhone app, but it wasn’t until AT&T’s (T) sales pitch landed in my inbox Thursday morning that its significance hit home.

It’s called the AT&T Navigator — a turn-by-turn GPS navigation system for your car that runs on an iPhone 3G or 3GS.  From the press release and early reviews it sounds like it’s packed with features, from voice activation and spoken directions to the ability to search for the nearest Wi-Fi hotspot and the cheapest gas.

The problem with the application is how you pay for it. Downloading the Navigator is free. Owning it is expensive: $10 added to your monthly bill — even if you delete the app — until you contact AT&T and shut off the service.

Over the life of a two year AT&T contract, this one application could set you back $240, more than you paid for the iPhone itself.

Welcome to the world of subscription pricing, one of the more than 1,000 new application programming interfaces (APIs) added to the iPhone’s software development kit (SDK) last March.

“Included in these APIs,” promised Apple’s (AAPL) press release at the time, “is the ability to leverage the incredible purchase model of the App Store within apps. In-App Purchases will allow developers to offer subscription content and provide the ability to sell new content and features in a simple and secure process.”

Senior vice president for iPhone software Scott Forstall, when he talks about subscription purchases, likes to use the example of a book publisher who might want to charge customers $10 or $15 to download a new title. That seems fair. AT&T’s Navigator does not.

[See Adam Frucci's prescient Why iPhone In-App Transactions Could Be a Disaster, posted in Gizmodo way back in March.]

CLARIFICATION: Although iPhone 3.0 allows subscription pricing, it does not permit developers to sell add-ons to free apps. As several readers have pointed out, AT&T is not billing Navigator users through the App Store; rather, it is taking advantage of its position as the iPhone’s exclusive U.S. carrier to add the fee to customers’ monthly bills.

Color me old-fashioned, but when I buy an iPhone app — or for that matter, a GPS navigator for my car — I want to own the thing outright. I don’t expect to open my wallet to a Trojan Horse that’s going to ding me $10 a month for the rest of my days.

Tom Tom, the company that was invited by Apple to demonstrate its competing navigation system at the World Wide Developers Conference keynote last month, promised to announce details regarding pricing and availability this summer but has not yet done so. If I were in the market for an iPhone navigator, I’d keep my eye on that one.

How do the new smartphones stack up in terms of features, sticker price and total cost?

BillShrink, a website that offers free personalized analysis of cellphone, credit card and gas costs, has lined the phones up in an easy-to-read chart (click image to enlarge). It compares …

• Apple’s (AAPL) new iPhone 3G S, which goes on sale next Friday
• Palm (PALM) Pre, which went on sale last Saturday
• HTC’s G1, the first cellphone running on Google’s (GOOG) Android platform

BillShrink’s bottom line properly draws attention to the total cost of ownership over the life of a 2 year contract.

It shows the iPhone on AT&T (T) — at $3,799 for unlimited voice and messaging — to be most expensive by far: 20% more than the G1 on T-Mobile (DT) and 46% more than the Pre on Sprint (S).

[NOTE: An earlier version of the chart did not include the cost of the iPhone and Pre in their totals.]

But the chart also makes it clear that in several respects you get what you pay for. For example, the new (entry-level) iPhone comes with twice the Pre’s memory capacity and 16 times the G1’s (although the G1’s memory can be expanded to at least 16GB).

And the chart actually underplays the vast advantage the Apple’s U.S. App Store (with nearly 50,000 programs) has over Android’s Marketplace (nearly 5,000) Palm’s App Catalog (18).

As for the total cost of ownership, your mileage may vary. If you don’t need unlimited voice and text messaging, the iPhone and the Pre can each be had for $69 per month, for a total cost of $1,878.76 over two years (taxes not included).

F0r more smartphone comparison tools, check out BillShrink.com.

When does it make sense to upgrade to the new iPhone 3GS that Apple (AAPL) unveiled Monday?

That depends when you bought your first one. (This assumes you already own an iPhone; if you’re happy with your current phone, you can stop reading here.)

If you are one of the 270,000 customers who bought one of the original iPhones in June 2007, your two year contract with AT&T (T) is about to expire and you can buy a new iPhone starting June 19 at the same subsidized price paid by new customers:

• 16GB in black or white — $199
• 32GB in black or white — $299

As opposed to the discount price AT&T is offering “valued customers” who upgrade early:

• 16GB in black or white — $399
• 32GB in black or white — $499

Or the full price for existing AT&T customers listed in Apple’s fine print:

• 16GB in black or white — $599
• 32GB in black or white — $699

If you are one of the nearly 6 million owners of a first generation iPhone still working off your original AT&T contract, the new iPhone is a big enough improvement that you’ll probably want to get one as soon as you become qualified for the subsidized price. You can check your eligibility at Apple’s website: http://buyiphone.apple.com. You’ll be asked for your phone number, zip code, e-mail address and the last four digits of your social security number. If you are not yet eligible, the program will tell you the date when you are.

If you are one of the 15 million who bought an iPhone 3G after it went on sale in July 2008, the decision process is a little more complicated. The new iPhone is better than the one you own — faster, longer battery life, built-in compass, better camera that can shoot video — but not $400 better. To use high-tech’s biggest cliche, it’s evolutionary, not revolutionary.

Much has been written about the extra $200 to $400 Apple and AT&T are charging existing customers. TechCrunch’s MG Siegler calls the new phone a “sucker’s bet” because it locks you into another 2-year contract with AT&T at a time when Verizon and Sprint are rolling out 4G networks that could support the iPhone. Siegler thinks AT&T would be wise to extend its customers an “olive branch” to keep them under the tent:

“Sure, they would have taken a hit, probably a fairly big one, but … it’s really only $200 per customer — AT&T makes that off of me in two months with my bill. And if they do lose the Apple exclusivity, they will effectively be losing $1,200 (one year’s worth of bills) that I otherwise would have been paying them.

“Instead, basically what it sounds like to most current iPhone owners is AT&T saying that, ‘we love you as a customer so much that we’re going to make you pay an extra $200 for this new device since you stuck around with us.’ “

I was among the 1 million people who bought an iPhone 3G the first weekend it went on sale. My two year contract has another 14 months to go. But when I run my numbers through Apple’s eligibility app, I find I can get the new-customer price six months before my contract expires. On Dec. 12, 2009, to be precise.

Which is why I’m waiting until Christmas.

See also:

It’s labeled “Sprint confidential information for internal use only,” and accompanied by a warning that any “improper sharing” is considered a leak, will be investigated, and could result in “termination.”

But that didn’t prevent a copy of Sprint’s business/executive launch guide for the Palm Pre from falling into the hands of the sleuths at Engadget, who published the 21-page document in its entirety on Sunday.

It’s chock full of juicy details — including the dates of a Hollywood promotional event (June 3), a New York executive breakfast (June 5) and invitation-only VIP events at 10 flagship stores (June 5).

For the rest of us, who have to wait for the official June 6 launch, there are instructions to staff about who should and shouldn’t be sold Palm’s (PALM) bet-the-company device.

“We Can’t Afford to Sell the Pre to the Wrong Customers,” warns the call-out text.

But most relevant for would-be buyers — and competitors — are the details of Sprint’s (S) pricing plans, which start at $69.99 (for “Everything Data” and 450 calling minutes per month) and $99.99 (for “Simply Everything,” which includes unlimited minutes). See the chart below:

There’s also a handy “Smokes the Competition” chart that compares features and pricing with AT&T (T), Verizon (VZ) and T-Mobile (DT) for Apple’s (AAPL) iPhone, Research in Motion’s (RIMM) BlackBerry Storm and Google’s (GOOG) and HTC’s G1, respectively. See below:

For anyone thinking about buying a Pre, it’s a must-read. Get it here.

In the dog days of summer last year, when balky downloads in cities across the U.S. were slowing iPhones to a crawl, Wired.com’s Gadget Lab launched a survey of 3G network speeds to try to pinpoint the problem.

Gadget Lab invited iPhone owners all over the world to run a simple network test and submit their findings electronically.

After collating the results from 2,636 users — 62% of them in the U.S. — Wired concluded that the fault lay not with Apple’s (AAPL) device, but with the U.S. carrier it had chosen to partner with, AT&T (T). See the results here.

Now, following rumors that Apple has been talking with Verizon (VZ), the Gadget Lab has decided to give it another try.

On Monday, it launched a second Battle of the Carriers, this time testing all the major U.S. carriers — AT&T, Verizon, Sprint (S) and T-Mobile (DT) — and other 3G smartphones, including Research in Motion (RIMM) BlackBerry.

The exercise only takes a few minutes. The instructions, available here, are fairly straightforward: you go to a Wired website on your phone, take the test, and then record your results on an interactive Zeemap. Just remember to click the “details” tab before you submit your entry, or else you end up — as I did the first time — sticking a blank entry on the map.

Below the fold: The 2008 results in map form.

Someone at Verizon (VZ) has been busy winding up the rumor mill this week, leaking stories to at least three news outlets about a pair of prototype wireless devices that Apple (AAPL) is reported to be shopping around.

In the past two days, news items in the New York Times, USA Today and BusinessWeek have all cited unnamed persons briefed on a new round of negotiations between Apple and Verizon — two companies whose failure to reach an agreement in 2005 famously resulted in the original iPhone going to AT&T (T).

BusinessWeek provides the most detailed account of the two prototypes:

• A smaller, less expensive “calling device” described by a BusinessWeek source who has seen it as an “iPhone lite”;
• A “media pad” that would let users listen to music, view photos, watch high-definition videos and place calls over a Wi-Fi connection.

This “media pad” sounds a lot like the tablet Apple has been rumored to be working on for at least 18 months — and for which Apple is reported to have snapped up large quantities of 9- to 10-inch touch-sensitive screens. BusinessWeek reports that it is smaller than Amazon’s (AMZN) Kindle e-book reader, but with a larger touchscreen.

According to the BusinessWeek source who has seen it:

“We are talking about a device where people will say, ‘Damn, why didn’t we do this?’ Apple is probably going to define the damn category.”

Silicon Alley Insider’s Henry Blodget suggests that Apple call it the iPad.

The nature of the “calling device” is a matter of some dispute. USA Today suggested that it would run on Verizon’s CDMA network — a possibility dismissed Monday by Piper Jaffray’s Gene Munster as “unlikely” given the hurdles involved in building and supporting a cellular technology that seems to be on its last legs. As Apple COO Tim Cook put it last week: “CDMA doesn’t really have a life to it after a certain point in time.”

The timing of all this is also fuzzy. BusinessWeek’s sources tell it that one of the devices could come out this summer — but they don’t say which one. We’d put our money on the iPad, given that any Verizon iPhone — lite or not — would probably have to wait until after 2010, when the carrier’s next-generation LTE (Long Term Evolution) cellular network comes on line and Apple’s contract with AT&T expires.

Complicating matters are multiple reports that AT&T is trying to get Apple to extend its deal as the iPhone’s exclusive U.S. carrier beyond 2010.

The whole thing sounds like a typical high-wire Cupertino negotiating session, in which Apple seduces potential partners with impossibly sexy gadgetry, pits one against the other, and ends up extracting the most favorable terms for itself.

It’s no accident that one of BusinessWeek’s sources — Verizon Wireless CEO Lowell McAdam — says that before Steve Jobs went on medical leave, McAdam was talking directly with the master dealmaker himself.

UPDATE: The Wall Street Journal Tuesday reported that Verizon is in discussions with Microsoft (MSFT) to carry a touchscreen device code-named “Pink” that would compete with Apple’s iPhone by early next year. In a note posted after the report, Morgan Keegan’s Tavis McCourt pointed out that Verizon already sells 14 different touch screen phones, six of them running Windows Mobile. “There appears to be nothing new here from a product perspective,” he writes.  “If we assume Microsoft was the source of the leak, this speaks volumes as to how threatened it is by iPhone.”

See also: Rumor: An iPhone for Verizon in 2009

AT&T (T) released its first quarter results Wednesday morning, and although earnings were down 9%, its iPhone business was strong, with more than 1.6 million activations in the quarter.

According to Piper Jaffray’s Gene Munster, that’s good news for Apple (AAPL). In a brief report to clients he calculates that 1.6 million activations translates — once Apple Store and international shipments are added in — into sales of 3.7 million iPhones.

How does he figure that?

“Last quarter,” he writes, “AT&T activated 1.9 m[illion] iPhones and Apple sold a total of 4.4 m[illion] units. According to this relationship, the AT&T activation number implies a total of 3.7 m[illion] iPhones in the March quarter.”

That would be a positive sign for Apple shareholders, says Munster, because the Street is expecting the company to announce later Wednesday that it shipped 3.3 million iPhones in the quarter.

Strong iPhone sales are also good news for AT&T. 40% of those new activations came from customers who were new to the carrier. Once on board, iPhone customers tend to stay loyal (reducing “churn”) and generate an average 1.6 times more revenue than other customers.

Tune in here at 5 pm ET (2 pm PT) for live coverage of Apple’s 2009 Q2 earnings call.