Rumors of a smaller, cheaper iPhone are definitely not new and have floated around for nearly the life of the device. But Bloomberg has an article out today saying that Steve Jobs, despite being out on medical leave, is involved in strategic decisions involving a smaller, cheaper, more universal iPhone. Bloomberg quotes its unnamed source by saying the new phone would retail for about $200, lose the contract, have a universal SIM card and be a third smaller than the current iPhone 4.
Bloomberg points out how Apple released the iPod mini at a time when iPod sales were rising, but the mini addressed a new market segment that couldn't afford the larger version. It makes sense for Apple to eventually expand into the "smaller, cheaper" phone market, if only to go toe-to-toe with the myriad Android handsets now flooding the market.