Does This iPhone Rumor Hold Water?

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The next iPhone is slowly taking shape, despite Apple's (NAS: AAPL) best efforts to keep its next bestseller under wraps.

What's new?
So far, we've been told that the iPhone 5 (or 4GS, "New iPhone," iPhone V ... add your own naming ideas in the comments below!) will sport superfast 4G LTE networking, a slightly larger screen made by Sharp rather than Samsung, and maybe even a spiffy new NFC chip for buying stuff with your iPhone and not your credit card.

You should also expect another bump in processor speeds, as Apple does for every new generation of mobile hardware. There's a new dock connector on the way, perhaps triggering a wave of accessory sales. The new phone should look very similar to those of the past two generations, making some observers bemoan a lack of innovation while others say that you don't change a winning concept.


All of these upgrades have graduated from wild rumors to near-certain locks. They all make perfect sense, especially when it comes to keeping up with the Android Joneses with faster networking speeds and more comfortable screen sizes. After all, the best-selling iPad already sports both of these advantages. But these technical improvements must surely come at a cost, right? That's the big rumor of the week.

Spill the beans!
The Twittersphere was ablaze on Wednesday with reports that the next iPhone will cost $800 or more. Shock and horror all around, until online pranksters turned the whole thing into a big joke. And then the reality sets in: iPhones already cost $800 unless you let your mobile carrier defray the upfront costs in exchange for a multiyear contract.

AT&T (NYS: T) , Verizon (NYS: VZ) , and Sprint Nextel (NYS: S) all stand ready to sell you a top-of-the-line iPhone 4S with 64 gigabytes of storage for just $400. But if you decline the long-term contract agreement, the price springs right up to $850 per handset.

So it wouldn't exactly be shocking to see a high-end version of the new iPhone selling for eight Benjamins. That would actually be a slight discount from today's priciest options, thanks to financial assistance from your favorite network provider.

The price tag would be shocking if one or more of the big American networks withdrew the subsidies, which is an option that several of them have discussed in the past. Another potential bombshell: What if $800 was the contract-free price for the cheapest iPhone available?

Seriously?
But I haven't seen anyone making those suggestions with a straight face, and neither am I. Chances are pretty good that we'll see new iPhones under contract hovering just below the magic $200 price point at the low end. There will be pricier options, but most American consumers will never really know the difference. And if Apple plays a gambit like raising high-end prices to $1,000 or so, networks might still bite the bullet for now and just pass the costs along in the form of higher prices on the required data plans.

So this rumor kind of holds water, but it doesn't mean much in the end. That's just the way the cookie crumbles in Cupertino until the networks rise up in a synchronized revolt against painful subsidies. This just ain't the year for it.

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The article Does This iPhone Rumor Hold Water? originally appeared on Fool.com.

Fool contributorAnders Bylundholds no position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+.The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.

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