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Why the iPhone Nano Will Push Apple Into the Cloud

The Wall Street Journal is confident that Apple (APPL) is launching a smaller, cheaper phone dubbed the iPhone Nano. If the report is correct, the new iPhone Nano would also make Apple's popular Mobile Me cloud service, now $99 a year, free. The iPhone Nano could also finally open the door to cloud-based music and give AT&T (ATT) a leg up on the competition.

In other words, it's a game changer.

Remote music access
Apple acquired the cloud-based music service Lala last year, but it still hasn't updated the much-maligned iTunes software to offer cloud access to music. Remote music access is already a big trend this year for Apple's competition:

Why will the iPhone Nano push Apple into the cloud? Less memory. If the goal is to have a cheaper iPhone that can be fully subsidized by carriers and available for low-end consumers, the amount of memory is one of the few areas Apple can cut easily. It's hard to picture Apple compromising screen quality, processing power or other key features.

The less memory, the more dependent the iPhone will be on virtual access. Apps aside, music is one of the biggest memory hogs for iPhone users.

Mobile Me for free
As the WSJ suggests, chances are high that the Mobile Me cloud service will go free:

The service, which lets users store data in a central location and synchronize their calendars and contacts among computers and other devices, currently has an individual annual subscription fee of $99. Apple is considering making MobileMe a free service that would serve as a "locker" for personal memorabilia such as photos, music and videos, eliminating the need for devices to carry a lot of memory, the people familiar with the situation said.

That would be a smart move. Apple would be wise to make the service available on Wi-Fi-based iPods, too. Among other things, it could get in on the action that third-party companies like Dropbox and have been providing for years.

Apple's gift to AT&T?
Verizon (V) is basking in the iPhone 4 glory and critics, including myself, have all but assumed that the iPhone 5 will be an AT&T exclusive this summer as a way for Apple to keep a healthy relationship with the carrier. But maybe the iPhone Nano will be the gadget that AT&T customers get to themselves.

It would be a great boon for AT&T -- and potentially leave new Verizon iPhone customers seething -- but it's worth it for Apple to keep a positive relationship. Despite the Verizon hoopla, AT&T still has the most iPhone customers and, with 90 percent of its customers in a two-year contract, it will be in that position for a very long time.

Photo courtesy of Matt McGee // CC 2.0

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