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Report: Apple making cheaper iPhone to fight Google

Apple is reportedly getting ready to take on Android phones with a smaller, cheaper iPhone that does not require a contract.

Jim Dalrymple Special to CNET News
Jim Dalrymple has followed Apple and the Mac industry for the last 15 years, first as part of MacCentral and then in various positions at Macworld. Jim also writes about the professional audio market, examining the best ways to record music using a Macintosh. He is a member of the CNET Blog Network and is not an employee of CNET. He currently runs The Loop.
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Apple is reportedly working on a new line of iPhones, specifically tailored to take on cheaper phones using Google's Android.

Verizon

Citing a source who has seen the prototype, Bloomberg reports that one iPhone model would be "cheaper and smaller than the most recent iPhone." The new model is described as being one-third smaller than current models.

The phone is not the only thing getting smaller -- Apple is looking to drop the price and customer commitment too.

Bloomberg says that Apple wants to sell the new model for $200 without requiring the user sign a contract. Typically, wireless carriers require customers sign a two-year or sometimes a three-year contract in order to get a discount on a phone.

Reiterating rumors that have been around for some time, the report also says that Apple is working on a dual-mode iPhone that would work with GSM and CDMA networks.

Verizon Wireless began selling the iPhone 4 today. Analysts are predicting that the carrier could sell about 8 million iPhones in 2011.