Buzz growing about scaled-down iPhone for the holidays

AppleInsider has joined the ranks of those who believe Apple has a less expensive iPhone waiting in the wings.

If you like the iPhone but can't swing the purchase price, you might not have to wait long for a cheaper alternative.

AppleInsider is reporting that Apple has a second iPhone in the works for later this year that won't be quite as capable as the one currently out in the wild, but that will cost less and resemble the iPod Nano. The site based its report on the word of "extremely reputable sources" that declined to be named, presumably for fear of losing their jobs.

A smaller, cheaper iPhone could be arriving later this year, according to a new report. CNET Networks

This rumor cropped up last week with the back-and-forth between financial analysts from JPMorgan Chase in Taiwan and New York. Kevin Chang had issued a report similiar to the one posted by AppleInsider Thursday, claiming that Apple had a cheaper iPhone in the works that incorporated a number of new interface technologies, such as a touchscreen click-wheel similar to the iPod interface. But his colleagues in New York expressed skepticism at that notion, figuring that Apple would add technologies like 3G data networking before overhauling the user interface on a brand new product.

That still seems to make the most sense to me. Apple has said it will have an iPhone ready for the European market before the end of the year, and it would be pretty foolish to enter the European market--where faster cellular networks are prevalent--without a 3G phone. Such a handset could easily be tweaked for AT&T's U.S. network, giving prospective iPhone customers a faster option and a new model to promote during the holiday shopping season.

But price is still an obstacle to iPhone adoption, so a lower-cost model would also make sense. What is interesting--and confusing--about these reports, however, is the notion that Apple would introduce a new iPhone interface after having spent all that time and effort on commercials and videos demonstrating how to use the current iPhone interface. We'll have to see what else shakes out over the next couple of months.

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