Tomorrow the US$99.00 iPhone 3GS will be half that. That's the word from the Wall Street Journal and other media outlets. It's not a big surprise. AT&T will likely lose iPhone exclusivity any time now, and they want to lock customers in to 2-year contracts before that happens. It's also not the first sale on the 3GS, as Radio Shack recently had a similar promotion.
Apple still lists the 3GS at $99.00 on its own website. The 3GS would make for a good starter smartphone for many people, but lacks FaceTime, the retina display, HD video recording and HDR for stills.
Even without those features, the 3GS is an excellent phone, and if you live in an area with good AT&T service, it's an attractive deal. The offer is through AT&T retail stores and online.