Dust off  those iPhone nano rumors!

Bloomberg is reporting that Apple is working on a smaller, cheaper version of the iPhone for sale off contract.  The prototype was about one-third smaller than the iPhone 4, said Bloomberg’s source. (kinda like a HP Veer?)

To keep prices down, the smaller phone will use a processor, display and other components similar to those used in the current iPhone 4.

As we already found out, Apple’s also has a Dual Mode iPhone in the pike for the summer time:

Apple is also working on a so-called dual-mode phone, two people said. This device would be able to work with the world’s two main wireless standards — the global system for mobile communications, used by AT&T and overseas carriers including Vodafone Group Plc, and code division multiple access, used by Verizon Wireless. It is not known whether Apple intended to include this capability in the cheaper iPhone.

Perhaps the most interesting aspect of the report is that Apple is working on a Universal SIM which would allow users to jump from network to network.  A move like this would really hurt the carriers who have been able to corral their customers with long term contracts against expensive phone subsidies.

It would also be a significant drop in price.  Currently, an iPhone 4 costs $600 off contract.

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