Nah, just look at the Total Cost of Ownership. For a smartphone, it ranges between $1800-2600 over a two-year contract. You can get an iPod touch for about $200.If the iPhone ever goes to more than one carrier in the US, l wonder whether the Touch will gradually fade in popularity?
Let's not forget that the demographics of the iPod touch skew much younger (13-24) than the iPhone (25-49). Those youngsters simply don't have the financial resources to afford pricey postpaid contracts and data plans, unless mommy and daddy are willing to foot the bill.
Any way you do the math, the TCO is far lower for the iPod touch. Remember that iPod touch sales continue to be strong overseas, where most of the iPhone markets have dropped carrier exclusivity many months ago (even over a year ago).
The way the iPod touch would fade is if the carriers would offer smartphone contracts at $25 per month and give the device away for free. That's not going to happen. The iPhone's Bill Of Materials cost is nearly $190 and a carrier like AT&T is likely paying a subsidy of $350-400 per handset.
What's really odd is that with the exception of the Microsoft Zune HD (which is only sold in the United States), there is no credible competitor to the iPod touch. It appears that other companies are willing to concede this market to Apple.