It would not surprise me if Apple decided to release a 2nd, cheaper model.
They don't really have anywhere to go to grow at the high end. 70% of their iPhone 4 sales were to existing iPhone owners.... which means that if they want to spur on more growth then they need to tap a new demographic.
The next biggest market for them are people who WANT a smart phone, but cannot put down $200 + $85/month for the phone (essentially, $2,250 over a 2 year period). Remember that these fees are mandatory if you run an iPhone on AT&T's network.
The people who can't afford that price are probably primarily teenagers (whose parents have to pay their cell phone bill) and other people who are very price sensitive to cell phone costs (Boost/Metro customers).
By offering a lower cost iPhone with an cheaper monthly option for service, they will be able to sell more devices (and service and apps and advertisement space) to people who don't want to spend more than $60 a month on cell service. These people will be happy with a phone that makes phone calls, but only offers data via wifi and can still hold a ton of pictures, music, text, and movies.
Apple has to hurry because android manufacturers have been (slowly) rolling out low-cost android devices. They haven't been advertising them much, though
