Smaller? Probably not, but maybe just to the point of the iPod Classic form factor. But I guarantee you there are millions who would use something scaled down to the point your grandma could use it. Put the iPod stuff plus just basic phone functions (phone, contacts, voicemail) for $299 and you would get a lot of buyers. I can tell you that my mom has absolutely no use for all the Internet stuff on the iPhone. But if it could make using a cell phone easier, she'd perhaps be into it. It's kind of like how a lot of people loved the iPod w/Video, but that didn't stop the Shuffle and Nano from selling without any video capability.