Recent rumors suggesting that Apple was planning to release a smaller, less expensive iPhone model—dubbed the "iPhone nano"—don't appear to be true, at least according to a new report. Apple is said to be exploring making a less-expensive iPhone model, but it won't be making a significantly smaller device to achieve that goal.

Sources speaking to The New York Times said that Apple won't shrink the iPhone "anytime soon" in order to offer a less expensive model. One source in particular noted that simply shrinking the iPhone wouldn't necessarily make it less expensive. Historically, making a device with the same functionality significantly smaller often costs more (in the short term), not less, and the source suggested that little or no savings in manufacturing costs would be realized by building an "iPhone nano."

A smaller screen size would also necessitate additional work on the part of developers to account for changes in user interaction. While the iPhone 4 has an increased resolution compared to older iPhone (and iPod touch) models, the physical size is the same. Developers take into account the specific screen size and area when determining placement and spacing of buttons and other interface objects; a different size requires a rethinking of the interface design and could significantly impact usability. Having a consistent screen size is seen as one of the iPhone's benefits compared other platforms.

Instead of making a tinier device, Apple is exploring ways to reduce the cost of an entry-level iPhone by changing internal components. Apple could use less NAND flash memory, a lower-resolution camera sensor, or other cost-saving measures, an anonymous source who claimed to have worked on multiple iPhone prototypes told the Times.

"Although the innards of the phone, including memory size or camera quality, could change to offer a less expensive model, the size of the device would not vary," the source said.

The "N97" codename cited in previous rumors as that of a purported iPhone nano was apparently the code name of the CDMA-compatible iPhone 4 release earlier this month, according to the report. There's some question as to the validity of this source's knowledge, however, as developer Steven Troughton-Smith verified that the code name for the Verizon iPhone is "N92" as we previously reported last year.

N97 is very likely a prototype device—for instance, an early prototype of the iPhone 4 was codenamed N89, but the released product is referred to as N90. It could indeed be a prototype that is smaller in size compared to current iPhone models, as a source for a Wall Street Journal report who claimed to have seen it said. It's perfectly possible for Apple to be experimenting in the labs without immediate plans to release such a product.

Sources for NYT did corroborate that Apple is working on advanced voice control for iOS devices, as reported in previous rumors, and that MobileMe is expected to receive a significant upgrade in the near future to enable syncing more types of content "without a cable," and could be made free to better compete with services offered by Google.