Speculating about iPhone nano, aka budget iPhone (not iPhone 3GS)

Apple just might have had the iPhone nano -- or whatever you'd prefer to code-name the second, lower budget version of the iPhone family -- ready to go as early as WWDC 2011, though they chose to make that keynote focus exclusively on OS X Lion, iOS, and iCloud. What people mean when they talk (or leak) about iPhone nano is still unclear, however. Just like "Apple is working on a TV" ultimately turned out to be a 27-inch iMac, and Apple's "interesting ideas in the netbook space" ultimately turned out to be iPad and the 11-inch MacBook Air, what "iPhone nano/budget iPhone" turn out to be will no doubt be difficult to predict in advance but obvious in hindsight.

Today, BGR reported:

According to our source, Apple will indeed be launching a prepaid / lower cost iPhone this year. We are told the handset will retail for no more than $350 without contract. Ready for the really interesting part? It’s entirely possible that the low-cost iPhone will in fact be the iPhone 3GS. [[BGR]http://www.bgr.com/2011/07/18/apple-to-launch-low-priced-iphone-for-350-iphone-4s5-end-of-summer/)

We've long speculated that iPhone nano might be a stripped down iPhone 3GS, same lower resolution screen and lower cost, high volume, components, but a smaller, tighter, refreshed package. Again, that's pure speculation but based on iPhone nano not being a straight up iPhone 3GS. (Or just a new name for the discounted iPhone 4 when iPhone 5 goes on sale.)

Apple has been tremendously successful at dominating the high end, premium phone market, and have grown by adding Verizon as a carrier. They've also done a good job in grabbing those who transition from feature phones to smartphones; an ever increasing number. That last group is hugely important, as are emerging markets. Low cost options are important to them, but so are low cost plans. Apple could make an iPhone nano free on a 2 year contract but AT&T and Verizon voice and data plans make that difference negligible when it comes to total cost of ownership (Saving $100 when you're spending $2000 is nice but not transformative.)

Cheaper plans on alternate carriers in the US, and certainly internationally, are one way to address this. (The other is a non-app phone, but it's hard to see Apple pull a ROCKR again.)

Either way, it's going to be interesting to see if Apple finally decides to pull the trigger on a second class of iPhone, and how they choose to market it. iPod nano became the best selling MP3 player in history. Could that lightning strike again in the smartphone space?