Last spring, TUAW asked how much you would pay for iPhone software. Well, it looks like $0.99 and $1.99 are the new $39.99 and $49.99 as far as mobile distribution goes. The App Store bucked the trend of high-priced phone software and now is ratcheting those prices down even further.

Developers are responding to high application supply and dwindling demand by lowering their prices across the board. As the App Store novelty wears off and consumers forget about once-"hot" items, the typical price tag continues dropping. Games that cost $9.99 at launch are almost universally $4.99 and less.

Apps like Koi Pond proved that $0.99 can generate a lot of sales. Short term sales are quickly being eclipsed by long term price drops. We typically get our tips about upcoming price changes directly from developers; 148Apps has introduced a automated price drop detector.

As the App Store continues to evolve from "get rich quick" to make money slowly, devs are working to find that sweet spot -- charging enough to earn a living but not so much that they aren't out-competed.

Based on these downward pricing trends, I expect ad-supported apps to really start taking off soon, the way they are doing in the jailbreak world. If developers can't build their revenue stream from charging higher prices, they may turn to alternative monetizing models instead.

Contrary to other analysts' rosy comments about Apple's supply chain, Gene Munster from Piper Jaffray is estimating that shortages in the supply of iPhone 3G handsets will last until mid-August.

Munster said that he'd wager "we'll see problems for another two to four weeks," adding, "early demand has been more than [Apple] expected."

Apple's own supply-checking tool reports that a little over a quarter of Apple Stores had iPhone 3Gs to sell today. The hardest model to find is the black, 16GB version. It was available in only 18 stores worldwide.

AT&T stores are also "nearly out."

[Via Macworld.]

CIO.com interviewed AT&T spokesperson Mark Siegel, who confirmed that Friday's activation server outage was due to massive worldwide demand. This may not come as a surprise, but it's the only official comment we've heard.

"The iTunes software appeared to have been so overwhelmed by demand [Friday] that customers were not able to go through that final stage and sync their iPhones," Siegel said.

Apple has not commented on their servers' performance on Friday. Nor have we learned any more about the other great mystery: the details behind the rocky MobileMe transition that lasted Wednesday through the weekend.

The CIO article also discusses Apple's physical supply chain for the iPhone 3G, and how it performed for the rollout. Analyst consensus: top notch. "Good job to Apple for mastering the physical supply chain so well that you have this high-profile launch and your problems are not on the physical side -- you have product in stock," said Kevin O'Marah, chief strategy officer at AMR Research.

[Via Reddit.]