No doubt about it. The iPhone's been a major success for Apple, in spite of its steep price tag. If recent reports are correct, however, the upcoming next-generation 3G iPhone may cost AT&T customers less than half of the original.

Today, you must pay full price for an iPhone, as AT&T does not subsidize the purchase of the device, as it does with many of its other smartphones. That's $400 for the 8GB model and $500 for an iPhone with 16GB of storage.

The 3G iPhone, with much faster cellular-wireless data networking, is due to ship this summer for the same prices and storage capacities as today's models. However, according to Fortune, the carrier plans to subsidize the cost of buying the new and improved iPhone considerably

Sign on the dotted line for two years of service and you'll be able to get an 8GB 3G iPhone for only $200 and a 16GB edition for $300.

At those prices, the iPhone should do even better than it has already, as those who've held off from getting one because of the steep price tag may finally take the plunge and buy one.

Fortune also reports that the new iPhone should integrate GPS to better support location-based services than today's iPhone's cell-phone-tower triangulation method. And, in spite of the addition of 3G and GPS, the new iPhone models will be a little thinner than the original, dropping to only 9.2mm thick from 11.7mm.

Not bad.

Apple sold over 4 million iPhones in 2007, shipped 1.7 million the first quarter of 2008, and is on track to reach its goal of selling 10 million units this year. The company extended the iPhone's reach to Austria and Ireland during that time period as well.

In June, Apple will release iPhone software update 2.0, which, in all likelihood will be included in the next-gen iPhone. This upgrade will feature the iPhone App Store, where users will finally be able to wirelessly download official native software directly to their iPhone, over a Wi-Fi or cellular connection. You'll also be able to side-load programs through iTunes.

The new iPhone firmware, which will cost iPod touch users a nominal fee, will also introduce a host of additional new features, including a number to make the iPhone more enterprise friendly; such as the integration of Microsoft ActiveSync technology to support push e-mail calendaring, and contacts, as well as global address lists and remote wipe in an enterprise environment.

The iPhone continues to be a boon for AT&T. Apple's U.S. partner netted 1.3 million new subscribers to reach a total of 71.4 billion wireless customers and grew profits by 22 percent to $3.46 billion last quarter.