Because Apple thinks that the Touch will compete with the iPhone. It's a stupid move and I hope I'm wrong since I know several people that are waiting to buy the touch with a camera primarily for gifts and for their kids.
Apple probably thinks that people will drop their phone service for the touch since it will be able to do everything but contact the outside world.
Apple probably thinks that people will drop their phone service for the touch since it will be able to do everything but contact the outside world.