Citing a Japanese tech news site with a history of accurate Apple predictions, CNET reports that the company is expected to unveil the next generation iPhone 5 on Sept. 7 along with a new lineup of iPods. Most interestingly though, CNET points to a different report that claims Apple also will be launching a free cloud-based iPhone alongside the full iPhone 5.

The source says the new phone would combine iOS 5 and iCloud to use Apple’s new cloud-based service to house data and would use parts from the iPhone 4, making it cheaper to produce than the full iPhone 5. Supposedly the iCloud phone would be free to consumers who commit to a two-year contract.

Read more at CNET ^[1].