Although this is still a rumor, it really makes sense in light of Apple's recent partnership with Wal-Mart. Wal-mart, as you know, caters to price-conscious (and who isn't these days) consumers. By offering a "slimmed" down version of the iPhone (both physically and feature-wise) at a lower price (say $100.00 new), Apple has the most direct route to these price-conscious consumers, with the added benefit of Wal-mart also serving as an additional distributor of the full-featured iPhones. I really does make sense.
Add to that the ensuing recession/depression, and this is a no-brainer