A new report from UK-based research firm Generator says that Apple's iPod business could soon put second-tier mobile phone makers in the shade. The report says that Apple could ship as much as $4.2 billion in wireless iPods (WiPods) by 2010. "A lot of people don't realise that Apple's iPod business is already bigger than Sony Ericsson. What's more, Apple is the market leader in a growth market while Sony Ericsson is a second-tier player in a mature industry," explains Andrew Sheehy, Research Director at Generator. The report says that Apple's growing industry and volume of shipments allows it to negotiate competitive deals with traditional mobile phone suppliers, such as miniature cameras, video recorders and wireless modems.

"Things change when you're buying in that sort of volume. A lot of people who supply components for use in mobile handsets are licking their chops right now: there's lots of new business up for grabs and we know that people are talking to Apple right now about doing this," says Sheehy.

Although Wi-Fi modems could be used instead, the report explains that the best way to implement a WiPod would be via wholesale data agreements with one mobile operator in each iTunes market. Apart from being able to take pictures and shoot movies with their WiPod, users could wirelessly publish their self-generated digital content on iTunes.

"The mobile content side is interesting but you could also offer knock-out voice service with this approach - Apple could offer free WiPod to WiPod calls, using a Skype-like software application. A lot of people in the mobile industry will be worried when this starts happening," cautions Sheehy.

The 10-page report is available for £90.