CrunchGear is reporting that Microsoft is planning to release an an iPod-phone killer, the Zune phone:

It will be a smartphone that works homogeneously with the Zune marketplace. It will most likely not, however, run Windows Mobile. Rather it’ll make use of an interface similar to the current Zune, an interface that I consider among the best available on audio players—I’m sure it can transition to a phone easily.

Connectivity is the major concern of the device. It is said that it will be able to sync with the Xbox 360 and stream video from the system to the phone via a wireless data connection. This would be pivotal in Microsoft’s proliferation of its media ambitions. Not only does it already have millions of 360s in homes capable of downloading movies, it’d be able to distribute those videos directly to its phones. Cool stuff.

The other detail that seems certain at this point is that the device will, if things go as planned, be available for the ‘07 holiday season, which seems like a decent time line. That gives Microsoft about nine months to get everything together, an entirely possible feat.

No word on yet on whether it will be able to connect to other phones, or if it will use its own proprietary network….