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The iPhone Price Wars

The game is definitely on.

With Steve Jobs' introduction of the iPhone 2.0 at Apple's (Nasdaq: AAPL  ) recent developer conference, the wireless industry is once again off to the races to capture the hearts and wallets of consumers in the second half of the year. And this time, it's competing less on features and more on price.

The iPhone's initial release last June changed the game for top product developers like Nokia (NYSE: NOK  ) , Motorola (NYSE: MOT  ) , and Samsung as they explore new ways for people to interact with a wireless device. But now wireless phone makers have an even bigger challenge -- meet or beat the new iPhone's features and allure, all at a price below $199.

Nokia already has several media smartphones with the same features included in the iPhone. Other phones, such as the HTC Touch and Samsung's Instinct, sport slick touchscreens as well. But the expense of these phones will no longer make them viable. That's why Sprint Nextel (NYSE: S  ) has already stepped in and dropped the price of the Instinct to $130.

Research In Motion (Nasdaq: RIMM  ) has claimed that it's not worried about competition from Apple in its space, but the Canadian company is fiddling with its product line to include bold new versions of the BlackBerry. If it can keep new versions of its devices priced comparable to the new iPhone, it should fare well this year.

One newcomer to the new 3G iPhone era, though, may have a tough time: GPS maker Garmin (Nasdaq: GRMN  ) . Not only is the company taking its maiden voyage in the smartphone space after dipping its toes in just a few years back, but it now also finds itself in a cutthroat market in which most of its products are already offering navigation applications. Moreover, Garmin's devices have never been targeted for the low end of the consumer market.

The most amusing part of the new "low price" smartphone battle heating up is that the total cost of owning a new iPhone is actually higher when you consider the rate plans AT&T (NYSE: T  ) has for the device. So the trick is more about leading consumers to higher usage. As usual, while device makers will be killing one another for more market share, the carriers will all be winners in the end.

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Fool contributor Dave Mock considered entering the smartphone market, but figures it's a losing proposition now. He owns shares of Motorola and Garmin and is the author of The Qualcomm Equation. Sprint Nextel is an Inside Value selection, and Garmin is recommended in both Global Gains and Stock Advisor. The Fool's disclosure policy is better than low-price -- it's totally free.

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