Rumors have swirled about Apple readying a new version of the iPod Touch with a camera and microphone, which, combined with a Skype account, would pretty much obviate the need for a home phone line once and for all.

A well-connected source tells us those rumors are on the money, and that Apple's factories in China are already manufacturing iPod Touch models with integrated cameras and microphones. An Apple spokesman declined to comment when reached by phone.

If iPod Touches with cameras and microphones go on sale "in two to three months," as our source expects them to (and which corresponds with our expected timeframe), they will transform the entertainment-oriented iPod Touch line into a voice communications tool wherever WiFi is available.

In addition to these voice-over-IP capabilities, which should have telephone providers quaking in their boots, the microphone (and camera) would enable the iPod Touch to understand voice commands, capture video and images, and work with a wider variety of programs in the App Store.

(Plus, as some Wired commenters have suggested, one could combine a microphone-equipped iPod Touch with the Verizon MiFi personal hotspot creator to enable – at long last – the iPhone experience on Verizon's network.)

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Photo: hooverdust