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If space utilization is the issue then use a 2.5mm jack. Like Palm (before HP) did over 10 years ago. Waterproofing a jack is not any harder than doing it for USB.

Eliminating the jack entirely just means I'll be looking elsewhere for my next phone and I've bought a lot of Google phones.

Bluetooth dropouts and interference are a regular occurrence. And dongles are not necessary unless the phone makers is just trying to make more money by removing existing functionality from the base device.