That's it! That's what Apple should do! Release the iPhone, but not through a specific carrier! Leave them unlocked (GSM, of course) and you can insert the SIM card from your existing carrier into it.
Granted, the iPhone wouldn't be subsidized by a wireless contract, but if people are willing to spend $300 for an iPod, why not get an iPhone that does that, and more (with perhaps a smaller capacity), for roughly the same price?
Granted, I'm assuming it would be roughly the same price. If you can get a Treo for about $300 with a service activation, it would seem that an iPhone that isn't compatible/as compatible with the general PC market would be a big enough disadvantage to keep the cost lower.
Then again, Sony Ericsson released the W800i which would essentially do most of the same things as said iPhone, and SE was selling it without a contract for $500. Apple does have amazing memory hookups though, so that price could go down, or at the very least should include a heck of a lot more than the 2 GB card that came with the W800i.
Let's break it down, shall we? To make a decent cell phone doesn't cost all that much. As far as the reception-factor goes, you can get free phones that work just fine as phones, but aren't loaded with features. Apple has the MAJOR hookups with batteries, flash memory and screens. Heck, use a vertical 5G iPod screen. Now all you're lacking is a camera (I would expect at least a 1 megapixel) and an GUI (OS X/iTunes-inspired, no doubt). The battery connector would be the same as an iPod, so you could still sync to a computer and use your third party iPod accessories with it.
It's also important to remember that there is talk of Apple creating its own MVNO. The only problem with that is they'd probably choose Cingular. The question then arises: do I love Apple more than I hate Cingular? I honestly don't know.
Maybe they won't go with Cingular. I mean, the ROKR wasn't exactly a whopping success... would Cingular cut them any kind of deal if they wanted to create an MVNO? Hehehe... perhaps Stevie J. leverages his ties at Disney to give Cingular inexpensive content in exchange for a reduced MVNO lease.
Steve, if you're reading this, first of all know that you're my hero. Second, please, please, please make the iPhone affordable and for the love of all that is pearly and white, DON'T GO THROUGH CINGULAR!
Hey Apple, want some extra battery life for that iPhone? Check out what NEC's put together: 50 hours of music playback on a cell phone. Click here.