By Katie Marsal

Published: 01:00 PM EST (10:00 AM PST)

Apple could introduce a complete revamp of its MobileMe internet service as early as next month that would be completely free for customers of the company's hardware devices, marking a departure and depreciation of the existing service which retails for $99 per year.

Citing a "trusted" source employed by a major educational institution, iLounge claims "the school’s supplier has said the current version of MobileMe is no longer available, and that Apple is suggesting new students sign up for the 60-day trial to cover the gap between the final MobileMe shipment and the launch of the new version."

Indeed, Apple in late February removed the $99 MobileMe product from its online store and notified resellers that it had discontinued the retail box SKU for the cloud-based syncing service, suggesting the company was prepared to launch a rumored overhaul of the service.

According to the latest report, Apple will reportedly support subscribers of the existing version of MobileMe for the next year, suggesting that the new version will be quite different from the current offering. It's therefore speculated that the extra year of support would likely cover those customers who recently paid for a full year of MobileMe, prior to Apple removing any method through which a user could pay for the service.

For weeks, there have been persistent rumors that Apple is in the process of revamping MobileMe, with the Wall Street Journal reporting last month that iPhone maker plans to turn MobileMe into a free service that would serve as a digital "locker" where users could store photos, music and videos.

That report was tied to claims that Apple would release a smaller, cheaper phone this summer, bundled with the new MobileMe services. It cited a person who claimed to have seen a prototype device late last fall, describing it as "about half the size of iPhone 4." The new model, harmonizing with a recent report by Bloomberg, was said to be aimed at delivering a low cost phone that costs "about half the price" of today's iPhone 4.

The smaller iPhone was said to be priced cheap enough to be offered by carriers for free with a smaller subsidy, or in the ballpark of $300 unlocked. Rather than being a dumbed down "feature phone," the smaller iPhone was said to simply be "significantly lighter," with a smaller edge-to-edge touch screen.

However, sources for the The New York Times quickly refuted the claim that Apple was developing a smaller handset, saying that the company has instead been looking into a cheaper version of the device that would appear roughly the same size.

The Times cited a senior Apple executive who said during a private meeting that making multiple iPhone models wouldn't make sense for the company, though the executive did note that the iPhone maker will continue its practice of offering older models at a discounted price.

The Times' report did, however, corroborate details from prior reports regarding enhanced MobileMe services and improved "voice navigation." It said that Apple is indeed building a "more versatile" free version of MobileMe that would allow users to sync files without using a cable.

“The goal is that your photos and other media content will eventually just sync across all your Apple devices without people having to do anything,” the person said.

Adding to those claims was yet another report from the well-sourced Jim Dalrymple at The Loop, who said he believes Apple's new MobileMe will allow cloud syncing and sharing of content, but the actual storage will be hosted on individual users' computers. That runs contrary to the reports which have speculated that Apple will host the files on its own servers -- an approach that he called "a bit much."

"Instead of trying to provide everyone with cloud storage, I believe Apple will use MobileMe as the brain of the cloud service," he said. "The actual storage will be on our individual machines. In effect, in the cloud."

He said the system would allow for every song in a user's library to be listed on an iPhone, though only some of them would be saved locally and others would be downloaded from a user's home PC or Mac via iTunes. A similar approach was detailed in a patent application uncovered last month by AppleInsider, which described seamlessly merging cloud content with locally stored files into one library.

"I also believe that MobileMe will be more than about media," Dalrymple said. "You will also be able to share and sync files and documents in much the same way. If there is a document on your home system that you need, it will always be available to you. Tap on it, and it downloads to your iPhone or iPad."

He also suggested that the service would sync contacts, calendars and other data, and would be compatible with Macs, the iPhone, iPad, iPod touch, and Windows PCs.