iPhone Hype Begins Again

Get ready for iPhone-mania 2.0.

On July 11, Apple will launch a zippier version of the iPhone starting at $199 with a two-year AT&T contract, down from $399. It will have built-in GPS for traffic directions, run on a speedy "3G" wireless network from partner AT&T and offer corporate e-mail support.

"Sales will explode," says Van Baker, an analyst at Gartner.

The iPhone — a combination phone/iPod and Internet device — first began selling last June. "As we arrive at the iPhone's first birthday, we're going to take it to the next level," Apple CEO Steve Jobs said Monday.

The $199 model can hold 8 gigabytes of music, photos and other media. A $299, 16 GB is available in a new color, white.

AT&T will be the exclusive U.S. distributor for another four years. One significant change: With the 3G version, AT&T said Apple will no longer receive a portion of monthly service revenue.

Instead, AT&T will fork out a substantial subsidy to help keep the price low. AT&T is hoping to drive mobile data usage and draw new subscribers.

While the subsidy — which telecom analysts peg in the $200 range — initially will put pressure on AT&T's profit margins, it could help push the iconic iPhone into the mainstream.

Jobs told USA TODAY that current iPhone customers can buy a new one and have their old plan morphed into a new two-year arrangement.

"This is a very positive move for AT&T, and it will gain share from Sprint and Verizon," analyst Tim Horan of Oppenheimer wrote in a note to clients.

While the iPhone has been a critical and consumer hit, Internet speed has been a chief complaint. The new phone uses faster networks that will dramatically improve mobile Web surfing.

Apple said it has sold 6 million iPhones. Tech analysts think it will meet its goal of 10 million by the end of the year. Over the next several months, Apple will roll out official sales in 70 countries, up from six.

In July, the company will launch the iPhone App Store on iPhones and the iPod Touch (like the iPhone, without the phone). It lets users easily download applications.

Getting such access to Apple customers "is phenomenal," says Andrew Erlichson, CEO of photo-sharing site Phanfare, which introduced an iPhone application Monday. "Power is shifting from the wireless carriers to the handset manufacturers."

Apple also introduced a new version of its $99-a-year .Mac backup service. Now called MobileMe, it automatically updates e-mails, contacts and other personal data across a computer and iPhone.