Cheaper iPhone Already in the Works?

File under barely-substantiated rumor: Apple may be working already on a cheaper version of the iPhone, addressing the #1 complaint that users considering purchasing the device have voiced so far.

At $499 to $599 (plus service fees), the iPhone isn't cheap. American Technology Research analyst Shaw Wu says that Apple recognizes this and is reacting to the market, just as it did when it rolled out the iPod Mini/Nano and iPod Shuffle products, filling a need for consumers who don't need all the bells and whistles of the full-blown iPhone.

On the other hand, bells and whistles are what the iPhone is all about. Do consumers really want a phone with a fancy interface that doesn't do all the cool stuff the first-generation iPhone is designed to do? Say, strip out web browsing, cut storage space down to 1GB, and remove the camera? Trimming out many of the other elements of the iPhone's operating system (like, say, its voice mail system) won't really reduce the cost of the phone, since Apple developed and already owns those components. It just doesn't save money by eliminating them.

The more I think about it, the more I have trouble finding things in iPhone that Apple could easily cut. In fact, the market on the whole has already been clamoring for Apple to address iPhone's shortcomings (lack of 3G service and instant messaging and an non-replaceable battery, namely) and add more features, not less. Will people really thrill over a bare-bones iPhone that still costs $399? What Apple needs to do is just cut the price across the board if it really wants to get people slobbering over the thing, instead of just the tech elite.

What's the magic price point for iPhone as far as you're concerned? 

LINK: Apple already working on cheaper varints of iPhone?