The pre-paid market is huge in India, China and developing economies. That's what Apple would be going after if it produced a new lower-cost model (not my taste but prob plastic for easier, cheaper production and multi colours).
For legal reasons in Oz, the iPhone has been available here from Apple sans contract almost from the start. Indeed, my sister has a (no contract) pre-paid 4S and I have an on-contract 5.
"Prepaid accounts for 95% of cellphone handsets in...