SAN FRANCISCO - Apple Inc. introduced an upgraded iPhone yesterday with a faster Internet connection and satellite navigation capabilities - priced $200 lower than current models, but with more expensive service.
Analysts had said Apple needed to slash the multimedia gadget's price and upgrade it to work over so-called 3G, or third-generation, wireless networks to hit the company's target of selling 10 million iPhones by the end of 2008.
An 8-gigabyte model is to sell for $199 starting July 11. A 16-gigabyte model will cost $299. The devices are to roll out initially in 22 countries.
Apple has inked deals for wireless carriers in a total of 70 countries to carry the new iPhone.
AT&T Inc., the exclusive U.S. carrier for the phone, said its plans for the phone would start at $39.99 a month, plus $30 for unlimited data. That works out to be a $10 increase from the cheapest plan for the first-generation iPhone.
AT&T also warned of an earnings hit because of the pricing, pointing to carrier subsidies as the reason for the price cut rather than a price reduction from Apple.
And Apple said in a regulatory filing that under most of its new carrier agreements, it would not receive a share of subscribers' monthly service fees, as has been the case with the first-generation iPhone.
Apple's participation in the cell phone market has been hurt by complaints about the year-old iPhone's data download speeds, which can make simple tasks like sending pictures over e-mail or downloading Internet videos painfully slow.
Apple said the 3G iPhone downloads data twice as fast as the old one.
Apple chief executive officer Steve Jobs said that when the original iPhone was designed, the chips used on the faster network sapped too much battery life and were too bulky. The company decided to wait to improve the device until better chip technology emerged that could fit the iPhone's slim design.
The addition of global-positioning technology improves the iPhone's accuracy in locating users. Current versions use a combination of cell phone towers and WiFi locations to help users figure out where they are.
Jobs showed off the phone at Apple's Worldwide Developers Conference in San Francisco. His announcements were widely expected.
Apple said it had sold six million iPhones since the first model was launched nearly a year ago, and 700,000 since March. That points to a steady slowdown in sales from the fourth quarter last year, as customers have been waiting for the 3G version.