Rumors of a less expensive iPhone, in one form or another, certainly aren't new. Rumors follow want. We want iPhones, the less expensive iPhones are the more of them we can have an more often we can have them. Apple knows that too. The original iPhone was Ballmer-laugh inducing expensive, and Apple and Steve Jobs adjusted the price down, and then changed course to a subsidized model for the iPhone 3G starting at only $199. The next year, when Apple introduced the the iPhone 3GS, they kept a lower-capacity version of the iPhone 3G around, starting at only $99. In 2010, when Apple introduced the iPhone 4, the iPhone 3GS went to $99. And in 2011, when Apple introduced the iPhone 4S, the iPhone 4 became the $99 iPhone, and the iPhone 3GS was positioned at $0 on contract. With the 2012 introduction of the iPhone 5, the iPhone 4 has become to $0 iPhone.
It's not difficult to imagine a second line of thinking at Apple, one where they also tossed around the idea of secondary line of iPhones, designed to be less expensive from the start. Rumors of that "budget iPhone" or "iPhone nano" have been around every bit as long. But if that was the case, if Apple has such a device in the planning stages for 2010 or even earlier, they chose not to go that way, not to introduce more than one new model a year. At least not then...