The move comes as Telstra chief executive David Thodey is reportedly attempting to increase the company's revenue through a larger emphasis on consumer products.
Telstra has been widely regarded as offering the weakest of the iPhone plans, with most more expensive than similar plans offered by Optus and VHA and often containing no data packs - essential for checking e-mail and browsing the internet.
But from today, Telstra will give all new iPhone 3G customers a $100 credit on their account with the offer to last until Boxing Day.
The company offers a plan for the 16GB iPhone 3GS requiring customers to pay $49 upfront for an $80-per month deal providing 150MB of data.
Warren Chaisatien, research director and principal analyst of Telsyte, says the price reduction is a good thing for the industry and shows the use of smartphones is growing.
"This is a good thing for the marketplace. Everyone knows Telstra is the most expensive provider, and is not the consumer's first choice. They know they are trailing when it comes to customer choice, and this will probably boost their standing a little bit," he says.
But Chaisatien also says the move could be a precursor to the release of the next iPhone, which is expected to be announced next year for a June release.
"The iPhone 3GS was released in June this year, and when you look at Apple's typical product launch cycle there is a release every year, so the 3GS has about six months to go before a new model is out. Perhaps this move is just getting ready for that by stealing market share while they can."
But while the $100 credit will reduce the plan's price, Optus still comes out on top by offering the 16GB iPhone 3GS for free on a $79-per month contract with 1GB of data.
More data allows users to spend more time browsing the internet, checking email and watching videos on YouTube - three of the smartphone's major drawing cards.
But Telstra's plans are more expensive and do not contain as much data, limiting the functionality of the device. This has caused most iPhone customers to sign up with either Optus or VHA, attracted by the relatively cheap deals.
Optus' parent company SingTel announced in August it had eight million mobile customers, with 200,000 signing up within the previous three months - the time period in which the new iPhone 3GS was released.
"This growth was underpinned by demand for Apple iPhone 3G, other smart phones and ‘Timeless' plans," it said earlier this year. The company's revenue increased over the year by 12% to $2.19 billion, up from $1.95 billion a year previously.
Both Optus and VHA have provided users with a range of different smartphones. Telstra has been more reluctant to offer high-end smartphones for lower prices, but this has caused it to miss out on potentially millions in revenue as demand for feature-heavy handsets increases.
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