The Wall Street Journal has confirmed a rumour from Bloomberg that Apple is working on a new, smaller version of the iPhone.
The report has also added that Apple is working on reviewing the software services for the iPhone, with the company considering making the MobileMe service completely free.
According to one source who saw a prototype of the phone, the gadget will be sold alongside the existing iPhone line and is about half the size of the current phone.
The mini-iPhone would cost about half the price, allowing it to be sold for $US199 on a two-year contract.
The report also claims that MobileMe could become part of a new music service that Apple has been working on – this could be the same cloud-based iTunes service several rumours have been hinting at for the past year or so.
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