Screw that. I'm cheap. The data plan required for the "smart phone" is another $35 a month --> $420 per year on top of the ~$1000 I already pay. And I don't need internet access every breathing moment. Yeah, and the cost per gig is marked up by thousands. I haven't caved on the phone yet: I use an iPod, which uses wifi only and so I don't have a data plan.
I had an iPhone for a while, but yeah, it's pretty steep (and I was getting a federal govt discount, too, yet), so I eventually broke my contract and sold the phone.
I went iPod Touch only for a while, but WiFi isn't *quite* widespread enough for that to be really convenient yet. After a while, I got a Verizon iPad, which is a pretty good compromise: I tether my iPod Touch to my iPad thru Bluetooth, and that way, I get cellular on my iPod Touch. iPad data plans are significantly cheaper than smartphone plans, too -- I use Verizon's 1 GB per month plan, which is only twenty dollars. And since I already carry a backpack everywhere I go anyway, the iPad can just stay in the backpack while the tethering is turned on, and I don't even notice the extra weight. I also have a decent-sized screen for when I want to access the web or whatever when I'm not at home. Another plus to this arrangement is that I can check my personal email and so forth at work without using government-owned equipment, where there's no expectation of privacy.
The only downside is that there's no phone service this way, but for me, that's not an issue because I almost never use voice service (cellular or otherwise). Well, that and the fact that you do have to buy an iPad, of course, but in the long run, that's still a lot less expensive than a smartphone.