Cloud-Based iPhone?

Apple's possible plans to produce a cheaper, smaller iPhone might also be a test of a "cloud-based" smartphone. The new device might also come with a major revamp of Apple's "MobileMe" online storage service. One way to reduce the price of a new iPhone is to dispense with memory. MobileMe lets users store data in a central location and synchronize their calendars and contacts among computers and other devices.

That same functionality also presumably could be used to support a cloud-based storage replacement for local memory.

If a potential new free MobileMe service is available to store photos, music and videos, the issue will be experience. Will cloud storage be a suitable replacement for on-board storage?

Apple Works on Line of Less-Expensive iPhones - WSJ.com (subscription required)