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Rumor: Apple to Sell Contract-Free $350 iPhone

BGR has reportedly received insider news that Apple will indeed launch a prepaid / lower cost iPhone this year. The device will retail for no more than $350 without a contract, and could possibly be the iPhone 3GS which AT&T currently offers for $50 with a new two-year ball-and-chain (contract). It will also supposedly land on the Sprint and T-Mobile networks here in the States later this year.

As for the next iPhone, something will be announced by the end of the summer, maybe late August. Previous reports indicated that it will be the iPhone 5 sporting a "radical" new design. But the unnamed insiders weren't too sure if that model will be the next iPhone release – Apple may actually produce an iPhone 4S. Speculation is that if Apple planned to release a new form factor this year, we would have already seen the 3rd-party protective cases.

Additionally, there's talk that, for 2011, Apple may sell the super-cheap iPhone 3GS for the low end price tier, the iPhone 4 for the mid-range price tier, and the iPhone 4S addressing the high-end market. A three-pronged attack shouldn't be surprising given that Google's Android platform is slowing eating away iOS market share. Offing a contract-free iPhone 3GS for $350 would also mean Apple finally gets to dip its toes into the prepaid pool. This actually makes more sense than devising a cheaper, smaller iPhone form factor from scratch. Besides, if the 4th-generation iPod Touch really is receiving 3G support this fall, possibly mimicking a 4-inch tablet, then Apple may have an even wider spread in its defensive stance against Google.

As always, rumors of insider information from unnamed sources should be taken with a grain of salt unless someone happens to discover one of the rumored models in a bar, dropped by a drunken Apple employee. Still, would $350 too steep for old Apple hardware like the iPhone 3GS? Wouldn't consumers be better off buying an iPod Touch with 3G connectivity (and use Skype)?