Verizon (VZ) further lowered the price of BlackBerry Storm 9530 touchscreen smartphone to just $49.99 under a two-year service contract. This is the company’s second price cut on the popular handset. A customer buying a BlackBerry Storm will also get a second BlackBerry handset (equal or same value) for free.

Verizon had slashed price of the smartphone to $99.99 in July, representing a 50% discount on the $200 launch price. BlackBerry Storm is marketed by Verizon through an exclusive distribution agreement with Research In Motion (RIMM). The handset was launched in November last year as the first touchscreen phone in the BlackBerry series.

BlackBerry Storm was originally positioned as an alternative to Apple Inc.’s (AAPL) iPhone. However, it failed to generate strong market response due to certain limitations, most importantly, the lack of Wi-Fi support. This has so far prevented Verizon from effectively competing with iPhone 3G, marketed in the U.S. by archrival AT&T (T). Competition has further intensified in the high-end US smartphone market after the launch of iPhone 3GS by AT&T and Palm Pre by Sprint Nextel (S) in June.

Driven by its aggressive price reduction on BlackBerry Storm, Verizon is better positioned to compete more effectively with AT&T. Moreover, this also paves the way for the upcoming launch (likely in late September/October) of BlackBerry Storm 2, which is expected to feature Wi-Fi capability and a more user-friendly touchscreen technology.

While BlackBerry Storm 2 is expected to be positioned as a head-to-head competitor to iPhone 3GS, it remains to be seen whether Verizon’s new approach effectively succeeds in driving sales in the intensely competitive domestic smartphone market.

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