Excellent summary on iPhone 5C from John Gruber. The iPhone 4S that is free on contract sells for $549 and an unlocked iPhone 4 for $449, compared to the iPhone 5 for $649. Hence in the US we can still get a 'free' iPhone 4 or a $100 cheaper iPhone 4S, since the carriers subsidize the price of the phone for a two year contract. However in other countries (like India) the carriers do not subsidize the phone and customers have to pay the unlocked price of the iPhone (+ an additional fees, adjusting for foreign economies, let us assume this is non-existent for simplicity of this analysis). So for a customer in India, the price of the iPhone ranges from $449 to $649 (equivalent in Rupees). For Apple to expand its market to lower cost customers the price of the rumored iPhone 5C should be substantially lesser than $449 and around $300 - $350, sounds reasonable and from John Gruber's math of adding mobile components to an iPod Touch, this price does not seem far off. A low cost iPhone 5C for around $350, an iPhone 5 for around $500 and the new iPhone 5S for around $650, will have a wider range in attracting the masses.
Also like he mentions, it is equally important for Apple to maintain an iPhone lineup that is as uniform as possible. Right not we have two screen sizes and two different access ports (iPhone 5 has a bigger screen and a different port). So having all the iPhone models with a uniform set of basic hardware specs would be ideal for Apple, for its accessory makers and mostly so for the customers. And this will enable Apple gain one step further ahead of the fragmented Android. The availability of iPhone 5C in different colors is just an add on benefit.
Analyst Gene Muster commented that iPhone 5C might not support Siri to enable cost cutting and John Gruber makes a valid point on Siri being a valuable feature for Apple and no suitable product of it can be missing Siri. Steve Jobs famously rejected the idea of Apple making Netbooks as there was no way for Apple to make a laptop that cheap that did not suck. And hence the iPad was born and we all know what type of success it has had, both in terns of affordability and quality. If Apple is still Steve Job's Apple, iPhone 5C will still be a product of high quality. It might have compromises in terms of advanced features but will not compromise on the customer satisfaction and user experience.