It’s about to break wide open.

With the commodity price of the $99 iPhone 3G and the still-reasonable price of the iPhone 3G S, Apple is poised to take its already stellar entry into smartphones and establish a position of lasting dominance that may be unrivaled for some time to come.

Remember where Apple started: the iPhone once cost $500 and still garnered lines around the block, selling 270,000 iPhones on its very first weekend (Palm’s much-ballyhooed Pre only sold 50,000 in their hyped launch this weekend). The 3G model sold a million units, even though initially you had to order one in person. Step back and rethink what these people are lining up to do: hand over either $200 or 300 and then signing their name on the dotted line committing themselves contractually to about $2400 over two years–and a million people did it over just one weekend! And in just a few weeks, we’ll see it all over again.

The sales are going to really explode in 2009. The app-store fueled mass awareness of the 50,000+ incredibly useful, creative, fun, widgets available for a few dollars (or free!) is only going to reach higher levels as Apple unveils the TomTom GPS functionality, the “find my iPhone” feature, and the video camera offered with the iPhone 3.0 software and iPhone 3G S updates. Here’s an example of what’s to come: giant financial firm E*TRADE, already seeing the opportunity to harness the most popular mobile platform out there for apps, is now spending its own advertising dollars independently of Apple to highlight their iPhone application on TV. They may not be the first, but they’re definitely not going to be the last. The app store is a force multiplier in marketing that is unrivaled.

While there is already great social peer pressure to get the iPhone–just like the iPod before it, no average American can really name another smartphone competitor outside of the blackberry, which they associate with business–the advent of more geo-aware social apps and the peer vs. peer functionality in games is going to drive the notion that one HAS to have the iPhone–now at only $99 to enter. Eventually, parents will be able to keep track of their kids better, friends will make plans easier, and the tasks of everyday life will be simplified–but only if you’ve got the magic device.

Look ahead to iPhone 4, probably just a year away if the current upgrade cycle holds. Envision a device that has even more social connected features, something like Loopt is trying to do but that people actually use because it’s standard. A 5 to 7 MP camera that allows you to leave a second device at home when going out or to your kid’s soccer game. A “where’s my kid” feature like the new model’s “where’s my iPhone” that can be opted-into on Mobile Me for the iPhone you bought your 14 year old. Even something as simple as better battery life, which has improved with each generation. All of this with a “it just works” usability standard we’ve come to expect from Apple for years.

Sure, there are drawbacks to the iPhone announcements we heard this week that temper some of the excitement. Mainly in the United States due to AT&T–high priced upgrades for current iPhone owners, no tethering available, and the MMS features aren’t ready here yet, either. But these detractions, major to some, minor to others, don’t upset the overall table Apple’s set to run over the next few years and probably the decade.

From the first quarter of 2008 to the same period in 2009, Apple doubled its market share of smartphone sales from 5% to 10% (Nokia and Research in Motion (Blackberry) are #1 and #2, respectively). Don’t be surprised if Apple’s share a year from now have doubled or even tripled as the new lower price and rampaging entry into new markets such as China takes hold. Apple will have gone from a computer maker with a phone business on the side to a phone maker with a great computer business on the side in four short years.

Filed under: iPhone News