don't kill this thread! I think it's interesting and plausible idea. Almost any cell phone these days comes with a camera which can take photos and usually crappy quality video as well. These phones have bright color displays, are smaller than todays iPod videos, and still get impressive battery life.
Yes, there are differences - these phones don't have hard disks for one, but I don't see that as a dealbreaker at all. This next gen iPod/iPhone that's gonna be coming out soon if not Tuesday is more likely than not going to have a camera, a hard drive and a big color screen.
With all of these features in place, it would not be difficult to add a video conferencing feature. Another interesting concept would be if apple went away from the cellular companies and went with a WiFi enabled skype iPhone (skype wifi phones are already
on the market).
This phone would then be airport extreme enabled, allowing it to stream movies and music to base stations, taking away the need for a firewire or USB connection because files could be transmitted wirelessly to the iPhone, allowing the iPod to perhaps have limited browsing abilities, instant messaging, video conferencing, cars could be equipped with wifi so that they could also receive both music and video from the iPhone --- and all for free - no airtime costs like a cellular provider....
There are a lot of options here and most of the technology is already in place. It just hasn't been implemented in a way that appeals to the mass market. It could be "the next iPod" - the personal electronic device that everyone has been waiting for apple, or someone else to release that creates a massive new market.