As inexpensive as the iPhone has become over the last four years -- with last year’s iPhone 3GS going for as little as $49 new with a two-year AT&T contract -- many are still holding out hope for a prepaid model. According to one analyst, their prayers may be answered when Apple rolls out the new model this fall.

AppleInsider is reporting that at least one analyst believes the time is right for “a mid-range, contract-free iPhone” for the prepaid market, and is predicting just such a move from Apple come September with “a lower-end iPhone priced between $300 and $500 paired with a prepaid voice offering.”

“It’s time for a mid-range iPhone,” proclaims Deutsche Bank analyst Chris Whitmore in a note to investors on Monday.

Whitmore notes that while Apple has a potential market of 1.5 billion mobile customers worldwide, two-thirds of those are prepaid users, particularly in Europe and other countries where it’s more popular to move an existing SIM card to whatever new mobile phone strikes your fancy.

"Apple shipped (about 87 million) units over the past two years which suggests it has reached only six percent penetration of its current addressable subscribers," Whitmore notes. "Looking forward, we believe Apple has room to run both in terms of greater market penetration as well as incremental carrier additions going forward."

To address this, Whitmore believes that this year’s iPhone refresh will be accompanied by “a new category of device that would help Apple address that market,” AppleInsider claims.

The analyst sees an “iPhone 4S” that resembles the lower-end iPod touch, which would offer Apple larger profit margins. "Using this framework, we believe an 8GB iPod touch with an RF module could be priced ~$350 (unlocked without a contract) and still generate healthy manufacturing margins of ~53%," Whitmore claims.

There’s been plenty of chatter in recent months about an entry-level iPhone, although most of the speculation has revolved around a “mini iPhone” roughly half the size of the current iPhone 4.

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