This thread is actually already opened and I posted this there, so I will copy it to here.
Iv'e actually done some research on this. The patents which were taken out leading to the suspicion of a cheaper and likely smaller (scaled down) version of the iPhone mean nothing and here is why.
These patents, I believe there were 3 in total, were all taken out BEFORE the patents for the current iPhone features and phone itself where. What this means is that these patents could have been taking out for a number of reasons, one of course being a smaller, cheaper, iPhone but is it likely, no way. Whether that was an original prototype which they decided not to use or a patent to simply prevent other companies from developing a similar product, I would not expect Apple to release a smaller version of iPhone, at least not anytime soon.