The iPhone has quickly become the ultimate communication device for many. With a few tweaks, it could easily become the ultimate navigation device.

Creative Commons image by stevegarfield.

Imagine:

• You get into your car and put the iPhone in you iCar dock. As you drive, music from the iPhone wafts through your car’s stereo system using either a hard wire or FM transmitter (built in to the dock). The track information displays on the iPhone screen.
• A friend calls. Her picture and number shows on the iPhone screen. The music fades and you’re connected to her over Bluetooth. She invites you to dinner. “Text me the address,” you say. Moments later, the iPhone receives the address and asks you if you want to go there.
• The iPhone shows you turn-by-turn directions on Google Maps. The music resumes.
• The Google Maps traffic data show an accident ahead. The iPhone alerts you and prompts you to re-route.
• As you near your destination, images from Google Street View appear to confirm that you’re in the right place.
• You arrive at your destination and find parking three blocks away. Snap the iPhone out of the dock and the driving directions automatically turn in to walking directions.
• After dinner, you take a picture with the iPhone and upload it to flickr. The location data is automatically added and it shows up on your flickr map.
• You forgot where you parked your car. No problem, the iPhone remembers and guides you back. (OK, this part won’t work if you parked in an underground garage — you’ll get back to the garage entrance, but then you’re on your own.)

Technology-wise, most of what’s needed for the above scenario is already in place. GPS is the key missing piece. You would also want HSPDA to speed up the map data. The connoisseur would want Bluetooth A2DP for the music.

How much will this cost? I’d expect the service to cost $0-$10 a month. Wireless carriers have typically charged about $10 a month for navigation service. Verizon and Sprint have started to bundle navigation services with their high-end data plans.

The incremental hardware cost for the GPS chip is negligible. Apple could tack on an extra $50 and make a killing. Add on early-adopter pricing of $100 for the iCar dock and the $150 is still cheaper than most standalone nav systems.

Portable navigation devices from companies like Garmin, Magellan and TomTom have become hot as prices have plummeted to around $250. I took a road trip last month and a significant percentage of cars had navigation screens hanging from their windshields.

It’s expected that PNDs will become a billion dollar market this year. A GPS-enabled iPhone could rapidly take share in that market.

See also:

• Top trends and predictions for satellite navigation

More on: Apple, Google, iPhone, satellite navigation