There's a business model that would work perfectly with this phone, but Cingular won't play ball. Cisco wanted in the game in return for the iPhone name:
http://blogs.cisco.com/news/2007/01/update_on_ciscos_iphone_tradem.html
The business model is this:
Cingular provides access to the SS7 telephone network, in an access neutral manner. When you're away from home or the office, your voice and data traffic go over GSM. When you're within range of an open WiFi access point, your voice traffic goes over the Internet to a VOIP endpoint back at Cingular. Your phone registers on the appropriate network, and Cingular routes incoming calls accordingly. A bonus of this plan to the consumer is that now Cingular has coverage at your house in the sticks, even if there's not a cell phone tower for miles. Your phone works in the middle of your office building where no cell signal can reach, without any expensive premise buildout on Cingular's part.
Cisco has the technology to do this, and I think there's evidence that Cisco wanted to push Apple into collaborating in a GSM/VOIP network agnostic view of the world where cell phone companies provide what they provide best (SS7 and GSM access) while Apple provides what they provide best (an open user experience). And Cingular couldn't imagine that world, and Apple needed Cingular to launch this thing more than they needed the name from Cisco.
And it's a real shame, because Cisco and Apple have the right vision, but Apple sold out that vision to prop up Cingular's dying view of the world.