iPhone Nano Rumors, Apple To Be Hit with Antitrust?

In the past few days, there have quite a number of rumors about Apple’s plans to release a smaller iPhone to the market to compete with cheap Android phones. The rumors on iPhone nano are nothing new. We have been hearing about them for years. According to the NY Times, Apple is not planning to bring an iPhone nano to the market at this point. iPhone 5 will be roughly the same size as iPhone 4.

As the NY Times put it, a smaller iPhone would further complicate things for Apple. It is not clear how cheaply these smaller phones can be produced. Fragmentation will become an issue if Apple changes its smart-phone strategy:

Another person who is in direct contact with Apple also said that the company would not make a smaller iPhone at this time, in part because a smaller device would not necessarily be much cheaper to manufacture and because it would be more difficult to operate. More important, a phone with a smaller screen would force many developers to rewrite their apps, which Apple wants to avoid, the person said.

Apple executives understand the threat of the Android platform. The fact that there are many Android phones around is attractive to consumers. But why change a strategy that has worked great so far? It is not necessary for Apple to bring a smaller phone to the market when it can just keep dropping the price of older iPhones when new devices are launched. Piper Jaffray’s Gene Munster does seem to believe that a cheaper iPhone could be released for International markets:

If they are going to be a player in the global market they have to have a prepaid option

At this point, Apple has many other issues to worry about. The future of the company is clouded with Steve Jobs struggling with his health. The company’s latest move, digital subscriptions, has angered many publishers. The fact that U.S. antitrust investigators have started examining Apple’s digital subscriptions policies is not good news for the company. Apple requiring content producers/sellers to share 30% of their revenue with it is not the issue. But forcing content sellers to offer identical or better deals through iTunes can put a hurt on many of them. Content apps would be prohibited from linking to stores outside the App Store, which is simply a deal breaker for many.

It would not surprise us to see Apple change a few things in its current policy to avoid more lawsuits and a confrontation with the Department of Justice. Apple has worked hard to develop the iOS platform. But the current rules seem to be too strict.