Rumour has it the iPhone 3GS will finally be retired in favour of a cheap iPhone 4S with 8GB of storage.
The Telegraph claims that Apple will replace the iPhone 3GS with the 8GB iPhone 4 and a new 8GB iPhone 4S. The 8GB iPhone 4 will be offered free on contract (like the 3GS), and the 8GB iPhone 4S will become a new middle of the road. The iPhone 5 will sit at the top tier and will come in capacities of 16GB , 32GB and 64GB.
By doing this all iPhones will now be Retina displays, it was a good run for the old 3GS but it makes sense to retire it.