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CORAL GABLES, FL - FEBRUARY 10: Julie Bennink makes a phone call on her new iPhone that she had just purchased at a Verizon Wireless stores after they started selling the smart phone on February 10, 2011 in Coral Gables, Florida. AT&T had previously had a monopoly on selling the iPhone since 2007. (Photo by Joe Raedle/Getty Images)
One source said the new mini version would be about half the size of the current iPhone 4 and be available for about half the price.
Apple is also said to be revamping its MobileMe service and may possibly offer it for free, instead of the current $99 a year.
There was no specific date for the release of the new smaller iPhone, but sources said, while things could change, they expect it would be out this summer.