Anyone that has an iPhone or has used one going all the way back to the original will tell you that the touchscreen device can be hard to use in some instances because the buttons on the screen can be hard to touch. Each time rumors of the iPhone nano pop back up, I always think that a smaller iPhone would be even harder to use.
Earlier this month there were rumors flying that an iPhone nano would be coming soon, that it would be $199 without a contract, and be about a third smaller than the existing iPhone. The New York Times cites sources today that say the next iPhone will be cheaper than the current model, but will be the same size.
The reason they site for no smaller device is easy for me to believe – usability. The source claims that Apple feels a smaller device would be difficult to use and would not necessarily be any cheaper to build than the existing phone.