Apple may have opened a can of worms by removing all but one reason for buying an iPhone. For starters, they've given the iPhone a vasectomy, freeing of its GSM radio and carrier entanglements, and re-branded it as a standalone product even identical in appearance to its cellular sibling. On paper that seems like a sound strategy for product growth, and it is...for iPod sales. Unfortunately it's not going to do wonders for iPhone's prospects. Many consumers who otherwise might have purchased iPhones will now be offered a choice that will almost certainly lead them to buy an iPod instead.

After all, you can get everything iPhone has to offer in the same great design for just $299, sans phone functionality of course. Anecdotally I can attest to the existence of a large market for users who want an iPhone but don't necessarily want its phone aspects or the required switch in carriers. Many of those same folks bought iPhones anyway because no alternative existed...until today.

I had anticipated the release of such a product in the coming months, but I expected it no sooner than January of next year at MacWorld in San Francisco. To launch a product that so closely resembles iPhone in form and function now risks cannibalizing iPhone sales and stifling market growth for Apple's current and future handset line. My guess is this was a driving factor behind Apple's decision to simultaneously slash prices on the 8GB iPhone by two hundred dollars, removing a chronic barrier to entry and spurring sales.

The more I look at today's product announcements the more risk I see. Maybe I'm reading too much into the tea leaves but I see too much happening too soon. Unless Apple plans on cranking out more iPhones models in the next quarter, building a more robust line of mobile devices, I'm afraid iPod is going to take center stage and disrupt iPhone sales.