iPod touch Is Close, But Still No Contract-Free iPhone

If you don’t count the ol’ iPod Classic, Apple (s aapl) completely revamped the iPod line yesterday at its annual music event. The Shuffle saw the return of buttons. The Nano is now a miniature multi-touch marvel that can apparently double as a fancy watch in a pinch. Then there’s the iPod touch, which is now the most popular iPod model of all, thanks to support for apps and web browsing. On the surface, it looks like the new touch is everything one would want in a contract-free iPhone 4 without cellular voice support. I would say that it’s close, but not quite.

I will give Apple credit, as it found a way to cram more iPhone 4 features into the new touch, even as it kept price points the same. The new touch enjoys the 960 x 640 “retina display,” an Apple A4 chip and two cameras, both of which support Apple’s FaceTime video calling feature. That said, however, there are still three missing features that make the new touch close to, but not on par with, a contract-free iPhone 4.

Location, location, location! There’s still no GPS chip in the iPod touch. Instead, the device will use available Wi-Fi networks to triangulate a location, just as it does on the iPad Wi-Fi model I own. That method actually works reasonably well, but of course, requires the touch to be connected to a hotspot. So much for check-ins on Foursquare or finding local points-of-interest if there’s no Wi-Fi to be found.

Just give me data. Unlike the iPad, Apple chose not to offer a 3G radio option in the touch, likely to keep the device thin. To be as mobile as the iPhone, features such a radio and a microSIM slot would have been a nice offer. Data plans could have been month-to-month for those that want them, although an option like this would surely boost the price of the device; it’s a $130 option in the iPad, for example. The touch has always been limited to Wi-Fi, so this is nothing new, but again, it’s a key difference between the touch and the iPhone.

2003 called and wants its camera back. Yes, the new touch has a front-facing VGA camera and a sensor on the back too. That rear camera even shoots high-definition, 720p video, just like the iPhone, but don’t even think to compare the rear shooter to that of the 5 megapixel camera on the iPhone 4. Stills from the iPod touch are a lowly 960 x 720, which works out to just under 0.7 megapixels. A solid shot like the one to the right taken by my son with his iPhone 4 isn’t happening on the new touch. Pics will look fine from the touch for posting on social networking sites and such, but blowing them up is going to be a painful experience, as details will lose definition faster than you can say “one more thing.”

I raised these kinds of points prior to Apple’s new product announcement, saying that the touch will never have all of the same features as an iPhone because the phone bits allow Apple to enjoy a $600 average selling price per handset. The phone costs less than half that to manufacture and consumers in the U.S. pay $199 or $299 for the device. Apple receives a carrier subsidy to make up the difference between the ASP and the price a customer pays.  What incentive then, does Apple have to make an iPod touch equal to an iPhone — minus cellular voice, that is — when it will earn less profit per device? As long as we’re on a subsidy model for handsets, Apple has no incentive to do so.

Having said that, the new iPod touch is close enough to an iPhone 4 for me personally, and probably many others who already have a smartphone. I’ve pre-ordered a 32 GB model that I’ll carry with my Google Android (s goog) phone. My phone has a 5 megapixel camera for better stills and I’ll use the free Wi-Fi hotspot feature to get my iPod touch online during my travels. Looks like Apple is making money from me, even though it still doesn’t offer a contract-free iPhone 4 in the touch!

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