Apple making a shrunken iPhone? That would be tricky

Is there a way to take away features from the iPhone and still make a product people want to buy?

Word is that Apple has already or is currently considering this question. Rumors are swirling that a smaller and cheaper version of the iPhone to go on sale later this year.

Should we believe these reports? Probably. The big mobile tech event Mobile World Congress just kicked off in Barcelona. Apple's not there, but the company does make a habit of trying to steal the thunder from big trade shows, like it did when it sent invitations to reporters during the Consumer Electronics Show that everyone assumed rightly was the announcement of the long-awaited Verizon iPhone. Like CES, the MWC is big on Android and Windows announcements, so it makes sense for Apple to want to make a little noise. Of course, the leaked reports could just be a trial balloon to gauge consumer reaction, but Apple isn't exactly known for taking a poll before it does something.

So what would this mini-iPhone be like? Let's look at what the folks in Cupertino have done before with downsizing of existing, popular devices.

It's not out of character for Apple to take a well-received yet pricey product and make smaller versions that are more palatable to price-conscious customers. We saw it with the iPod, and we see it with MacBook models. But the same idea does not easily translate to a cell phone that also functions as a photo and video display device and mini computer.

Apple is adept at introducing a product people want, slapping a fairly high price tag on it, establishing a market for it, watching it become popular, and later introducing models that are scaled down in price and features that end up bringing in the most mainstream consumers.

The iPod Nano is the classic example. Apple took its extremely popular original iPod, which had a large hard drive for storing thousands of songs, scaled down the storage size and screen size, and knocked the price tag down to first make the iPod Mini.

Then in 2005, Apple introduced the Nano and really hit the sweet spot with customers. The company drastically downsized the iPod to the size of a business card--making the Mini and Classic iPods look hulking in comparison--by removing the hard drive in place of flash memory chips. And the Nano's price was much lower too: for 4GB of memory, you paid $249.

The value proposition was obvious: if you could live without the 30GB or 60GB hard drive in an iPod Classic, you paid less than the $349 or $449 those models cost. Sure the screen was slightly smaller, so it wouldn't display photos quite as well. But, as Steve Jobs noted when he introduced it, the Nano held "1,000 songs." The average human heard that and said, "1,000 songs? I can live with that."

It would be trickier to apply that same logic to a phone. How could you seamlessly take components out of the iPhone as it currently stands to bring the price down and still have a phone people would want to buy?

Paring the screen down in size is one way to shrink the price, but that would have a couple negative effects on the main features of the iPhone: watching videos, browsing the Web, and typing e-mails, texts, tweets, Facebook status messages, and more. A display smaller than the current 3.5-inch one would result in a lot of squinting--and the iPhone's screen is already on the smaller side of the most popular smartphones on the market. Plus, scaling down the display would in turn scale down the virtual keyboard. Any smaller and the iPhone's keyboard would be near unusable.

Two possible suggestions that are intriguing, though not very probable: an iPhone "Shuffle," as Technologizer puts it, meaning a screenless iPhone that does away with almost all features of an iPhone the way the iPod Shuffle did with the iPod Classic, and perhaps allow features to be controlled with voice instead of touch-screen input. That, frankly, sounds pretty awful.

Then there's what Cult of Mac is hearing: that an iPhone "Nano" is an iPhone with next to no memory for an all-streaming-media-all-the-time iPhone experience. The report cites a source that says MobileMe would be reimagined as a streaming video, music, and data service that would enable all the content on a new iPhone "Nano" to be kept stored on a remote server, instead of saved to the phone itself.

Apple has been working on a streaming media service. But it seems unlikely it would be released this year as described, not least because wireless carriers would likely have a fit over all that data streaming. The idea of Apple not giving users a place to buy apps and store them feels wrong. The App Store is key to Apple's momentum building and revenue generation with the iPhone, so an Apple phone without the ability to do that seems rather ridiculous and besides the point.

In general, it's very hard to think of any feature of the current iPhone 4 that would be possible to live without. If they scaled back a few features--say screen resolution or storage size--that would seem the equivalent of the previous year's model. And AT&T, and others, are happy to sell those for $50 to $100.

Somehow, Apple needs to offer an iPhone that's at least as good as last year's model, only smaller.