Tonya and I have been thinking about buying an iPod touch so we don't have to buy an iPhone, or rather, so we don't have to pay a monthly fee just to own an iPhone that we wouldn't use much for calling. Of course, that raises the question of just how much of an "iPhone without the phone" the iPod touch really is. Bill Palmer at iProng has done just now, and it appears that the primary concerns from our perspective are the missing Mail, Notes, Google Maps, and Weather applications; the Calendar application being read-only (you can't add events - how lame is that?); and apparently inferior screen quality. Other differences that seem less noticeable or that make sense given that the iPod touch is not a phone include no EDGE support, no Bluetooth, no external volume buttons, no built-in speakers, a plastic stand instead of a dock, a less-durable back surface, and no camera.
I suspect the ever-enthusiastic iPhone hacking community will come up with a way to reinstall the missing applications from the iPhone back onto the iPod touch, but that's pure speculation, and not something on which I'd base a buying decision. Might there be a way to buy an iPhone but avoid the monthly bill? Although it's possible to activate an iPhone with an AT&T prepaid GoPhone plan, the cheapest plan that iTunes presents, according to the screenshots Erica Sadun linked to in, is $49.98 per month, which includes 200 minutes and unlimited data usage. Since I'm more trying to reduce the overall cost of ownership rather than avoid the two-year contract, dropping the price from $60 per month to $50 isn't a big win. At least I hear that AT&T has updated their network to stop alerting prepaid iPhone users to every $0.00 data usage.
Now that the iPhone price has dropped $200, the 8 GB iPod touch is only $100 cheaper than the 8 GB iPhone. So what about buying an iPhone and using INdependence? Previously known as iActivator, is a hack application that promises to activate an iPhone without signing up for a monthly plan, although like many hack applications it's definitely not for the faint of heart. If it worked, it would enable use of an iPhone without the calling or cell data communication capabilities, which might be just about perfect.
The only nagging question is if it's ethical to work around what Apple and AT&T intend with a "hacktivated" iPhone. After all, Apple's pricing undoubtedly takes into account the monthly revenue the company will accrue from its deal with AT&T, so using an iPhone in this hacked fashion would damage both companies' bottom lines.