The rumors on the predicted release of the 3G iPhone just continue to flood our mail boxes with sources suggesting all kinds of things for the next generation iPhone. If we believe only half of what folks are telling us, the next generation 3G iPhone should be a very attractive device.

The latest rumors are suggesting that Apple’s U.S. partner, AT&T, will subsidize the iPhone to lower the price of the iPhone to an amazing $199 with a two-year contract. This, of course, will only be for the 8GB iPhone. This would put the “must have” iPhone in the very competitive position against both the Windows mobile phones, as well as the best-selling Blackberry models; coupled with Apple’s announcement of support for Microsoft Exchange could turn more corporate users in the direction of the iPhone.

The latest rumors about the next generation iPhone suggest that in addition to the 3G support, the new iPhone will also offer GPS abilities. The design of the iPhone itself will be revamped to include a shiny black rear housing, a headphone jack that is no longer recessed and chrome volume buttons, all in a package that is somewhat thicker than the first generation iPhone. Other sources seem to disagree with the new 3G iPhone being thicker and insist that the new phone is actually 2.7mm thinner than the first generation iPhone.

Apple does seem to continue to wind down the availability of the first generation iPhone to make way for the next generation model, but the next generation model is said to not be shipping with the new firmware which will enable third-party applications as well as ActiveSync support for Outlook. The latest firmware is said to be available shortly after the 3G iPhone is released.