And I just read an article about this.

http://technologizer.com/2009/02/10/applerumors/

"A Consumer’s Guide to Apple Rumors" :)

iPhone 1 and 2 run the same software, the touch all the software that doesn't use the phone capability's. Seems easy enough, adding another iPhone with different capability's makes it much more confusing.

This model would need a different name a the least.

This summer, you say?

You mean when the iPhone 3G is due an upgrade?

It seems obvious. A new model will come out with a better camera, more features, new looks... and the current model will go on sale for $99.

"The model could omit 3G and GPS functions, reduce camera resolution, and impose a cap on data usage;"

Apple benefits from economies of scale, by standardizing on the same components as much as possible -- it would cost Apple more to actually source a different camera, and different components for a 'cheaper' iPhone.

Tim Cook and everyone at Apple have made it very clear that Apple is not in the low-end mobile phone market. It just seems analysts like Abramsky (who's been a failure at much of everything else he's done), simply don't listen, and don't understand this market.

Apple will do what it always does -- introduce a higher quality product, and reduce the existing product to entry level. In fact, we have already had $99 iPhones, which were the refurbished deals AT&T was selling earlier last year. Those were regular iPhone 3G models -- and if Apple were to release a subsidy entry level iPhone 3G, it would most likely be similarly handled.

A new iPhone will be introduced, the existing stock of iPhone 3G will be available either via Apple's or AT&T's refurbished stores for $99, until supplies are gone.

That's no news.

I'd be far more interested in the other $99 product Apple will be introducing along with AT&T.

iPhone 1 and 2 run the same software, the touch all the software that doesn't use the phone capability's. Seems easy enough, adding another iPhone with different capability's makes it much more confusing.

But what capabilities is he talking about removing? The lack of camera, GPS, and 3G are meaningless, as the Touch already lacks those, and the 1st gen iPhone lacks the GPS and 3G as well.

They wouldn't get rid of wifi, as it would severely cut into what they use the phone for: Selling music and apps on the go.

After that, there's very little apple would get rid of that would affect apps. They could lose the accelerometer, as it is mainly just a goofy 'toy-like' feature of little real use. But that would hinder apps sales more than help cut price, so it isn't likely.