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Apple and AT&T may intro new 3GS to compete with DROID for the holidays.

Currently with a two year contract, customers can pick up an iPhone 3GS for $199 at 16 GB, and $299 for 32 GB. According to Buy Genius Report, AT&T may be adding a third option at $99 for an 8GB version. The iPhone is currently available at 8GB for $99, but it is the previous generation 3G iPhone. Also, AT&T is still selling refurbished 8GB 3G models for $50 at its online store.

The move may be a way to generate some fresh buzz for the 3GS in what’s presumed to be half way though its life cycle. If history is a guide, we should not expect to see a new iPhone until next summer.

The Motorola DROID is priced at $300. With a $100 rebate, the device matches the entry 3GS. A $100 3GS would undercut the DRIOD, and although with only 8 GB of storage, it brings to the table many competitive advancements over the nearly year and a half old 3G.

AT&T gearing up to launch $99 8GB iPhone 3GS?