I am not sure if a low cost iphone is needed in developped markets, but its badly needed in emerging markets. The emerging markets needs are diffrerent than developped markets, so serving the old iphone doesnt fit there need at all.
Emerging market parameters:
Unrelyable power grid
Limited wired internet access.
Low income, unable to afford multiple devices.
From those parameters, what they need is a low cost phablet with either long battery life or replacable...