A while back there were rumours of a budget-friendly iPhone but nothing materialized. However, Reueters has now resurrected these rumours and, citing "two people with knowledge of the matter," claims a cheaper iPhone 4 will launch in tandem with the iPhone 5 (or 4S).
The smaller pricetag will be a result of a smaller storage capacity. The cheaper iteration will have an 8 GB flash drive as opposed to current iPhones 4's 16 GB and 32 GB. It could sell for $99 on a full-term contract in Canada.
Meanwhile, the iPhone 5 should have a larger screen, enhanced antenna, and improved camera, among other subtle upgrades, the rumours go. A major redesign has been hinted at prior, but considering the iPhone 4 was a dramatic change unto itself, another transformation so soon after seems unlikely at this point.