John Gruber and VintageZen think it would be a good idea to cancel the iPod Touch, replacing it with a contract-free $200-300 iPhone. I think this is crazy. Yes it's nice to have a simpler product lineup, but that's the only plus here. They argue that it would help Apple's smartphone market share numbers to sell an unlocked device that many buyers would never actually buy a data plan for, but Apple doesn't care about analysts arbitrary market share numbers and even if they did, a device without a calling or data plan shouldn't be tallied as a smartphone in the first place, unless you want to start including Nooks and personal media players. Why is it in Apple's benefit to sell people an unlocked device that they could upgrade to a real phone by contracting with a carrier? Does anyone think Apple could negotiate a revenue share arrangement with a carrier for an unlocked phone they sell directly to the user? Maybe for a data-only device like the iPad 3G, but not a phone. The lock-in of a 2-year contract is too important to the carrier business model. So what would Apple's motivation be, when they could instead upsell the iPod Touch customer to an iPhone at a later date? There's also a zero-sum stigma about phones, in that a person only needs one of them. If a device is marketed as a cheap iPhone-that-you-don't-have-to-use-as-a-phone it still has the zero-sum taint, along with the mental inhibition of paying for a product you know you're not going to be making full use of. This floor wax / dessert topping use-case complexity nullifies any advantage gained by simplifying a product line. But the biggest reason for keeping the iPod Touch is because for someone who doesn't want an iPhone the Touch is a better, cheaper, smaller, lighter product. The iPhone 4 weighs 36% more than the Touch. It's 32% thicker, which makes a big difference in a pocket. The current iPhone 4 costs $400 more than a comparable iPod Touch, and if Apple can drop the price of a budget iPhone to the $200-300 range, you can bet they're able to lower the iPod Touch price point south of $150, opening it up to an ever larger market. No, if the product line is simplifying anywhere, it's going to be the elimination of the Shuffle in favor of the Nano. Further thought: An iPod Touch WiFi+3G, analogous to the iPad WiFi+3G, with an on-demand data plan option, would be really interesting.