I really hate this whole "cheaper iPhone" theory/idea/project/whatever. I think it's fine the way it is. Besides, there are plans that are more reasonable nowadays and also people are going to slap a case on their phone to change the color of it to what they want. I don't get the idea of making a cheaper more colorful version of the iPhone 5 (other than trying to saturate an already saturated mobile market with the Apple brand).
I'm not sure where you're located, but the rumors of this cheaper iPhone would be for emerging markets like South America, China, India, where price is an issue. We may not even see this phone in North America or Europe.