Microsoft CEO Steve Ballmer told Bloomberg earlier this month that a Zune phone is in the works. Assuming this FUD turns to fact, competition between Microsoft and Apple in the cell phone business changes the dynamics of the Zune-iPod battle entirely. Microsoft has long experience in this market, and has had some success. For example, there are four times as many Windows-based cell phones in the world as there are BlackBerries.

I'll reserve judgment on any Zune phone. But I do urge Microsoft to compete with the coming iPhone (the iPod-like phone coming soon from Apple) with a real killer app: VoIP software that uses Zune's Wi-Fi option to make free or cheap phone calls over the Internet. Imagine downloading free software that transforms your future Zune (complete with microphone) into a cell phone that does not require signing up with -- or ever paying -- Cingular, Verizon or Sprint!

Microsoft can do all this by creating a free development environment and other tools that facilitate the creation of new Zune options. (The right way to do this would be to go open source, but that's probably asking too much.)

This approach would leverage all Microsoft's strengths:

- Operating system expertise