Apple Said To Be Making Smaller, Cheaper iPhone

Now that the buzz about Apple's Verizon iPhone has run its course, the electronics firm is at the center of a new round of speculation concerning its iconic smartphone.

Various media reports over the weekend said Apple is getting ready to release a new iPhone model that will be both smaller and cheaper. Bloomberg News was the first to report the news, but the Wall Street Journal, quoting unnamed sources, put forward more details today, saying the new iPhone could be ready for release this summer.

The Journal quotes a source who viewed the prototype and described it as lighter than the iPhone4 -- the current model -- and having an edge-to-edge screen. The Journal says the codename for the new iPhone is N97.

Half the price

According to media reports, Apple plans to make the phone available to carriers at about half the price of the current model. That would allow cell phone providers to subsidize the entire cost of the phone, making it free to subscribers who sign a two year service agreement.

Currently, AT&T and Verizon pay over $600 for the iPhone4, making it available to customers at the subsidized cost of $199, if they sign a two year contract.

Apple generally introduces new iPhone products at the end of June, and most industry analysts expect a new release this June as well. However, it is not yet clear just what that will be.

In its report today, the Journal referred to the anticipated release as an "upgrade," suggesting the new product might not actually be a new model, just the iPhone4 re-engineered to run on 4G networks.

Persistent rumor

Interestingly, this isn't the first time that Apple has been rumored to be contemplating a cheaper, "Nano" version of its iPhone. The first time the rumor surfaced was September 2007, just a couple of months after the original iPhone hit the market.

Kevin Chang, an analyst for JPMorgan Chase, based in Taipei, reported three and a half years ago that Apple had filed a patent for such a smaller, cheaper iPhone. He also said unnamed parts manufacturers confirmed his hunch.

At the time, the smartphone market was largely non-existent and Apple was still not sure that consumers would pay $400 (less with a carrier subsidy) for an iPhone. Little did they know.

The first Apple iPhone went on sale June 29, 2007, commanding prices of $499 and $599, depending on memory size. Sales estimates for the first two days ranged from 250,000 units to 525,000.

There were early complaints over activation issues, as many consumers who stood in line to buy one of Apples new iPhones had difficulty in getting it to work. With the introduction of the iPhone4, consumers complained that if they held the phone a certain way, the number of bars dropped off and sometimes, so did calls.

Apple eventually addressed the problem by making plastic cases available, that seemed to solve the problem. Though the antennae design was changed in the version of the iPhone made for Verizon, reports suggest some consumers are still having the problem.