is the iphone a neceity when it omes to cellphones

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now when the iphone first released it was one of the hottest products on the market! everybody wanted one. unfortunately it was a very expensive item to own and unless you had oodles of cash lying around, it was unavailable for many people. now when i first took a look at the iphone i wondered, is this really something tha people will need? i mean if you have a perfectly fine working cell phone and a ipod already, why would you need the iphone? also, apple seems to be one of the best companies at making huge things alot smaller. why couldnt they make the iphone as smal as the ipod touch. just lookin at the thing it looks like to much of a heafty device to be carrying in my pocket!