I wonder if the innovator's dilemma will apply here, with cheap Android phones (and Windows too) catching up with the iPhone and they can no longer charge a premium.
1) The premium is invisible at the point of purchase... the iPhone 3GS is free, and the iPhone 4 costs $99.
Where Apple seems to be getting its profits are in the prices paid by the networks. I'm sure Verizon would love to pay Apple the same rate for the iPhone that it pays for, say, the HTC Rezound. But if Verizon drops the Rezound from their lineup, no one will care. If they drop the iPhone, they're going to lose share, because a substantial chunk of those customers will slowly bleed off to AT&T.
And AT&T is not going to play hardball with Apple. AT&T has witnessed first hand what having Apple in your corner does to your marketshare, and they will not fuck with that.
2) Android doesn't actually have a price advantage. IPhones aren't more expensive to build than Android phones, nor are the licensing costs cheaper. Apple has strong supply chain and patent advantages here, matched perhaps only by Samsung.
3) Achieving parity with Apple is proving pretty difficult. Android has strategic innovations in licensing and openness, but Apple has strategic innovations in supply chain, battery life, credit card database, and design that are entrenched. Entrenched in that even if Google/Samsung put their organizational oomph behind matching them, it's not certain they would succeed.
1. http://www.flickr.com/photos/choreographics/4836719813/sizes...
I'm pretty sure AT&T/Cingular was the largest wireless provider before the iPhone. Perhaps the iPhone kept them going while they would have been bleeding to Verizon*, but it's hard to say.
Verizon was.
Nope: http://www.engadget.com/2007/04/11/verizon-retakes-us-wirele...
The best angle of disruption now would be for higher performance individual solutions (i.e non-integrated components) to emerge that work together seamlessly (through defined standards).
From my perspective, it does not appear that non-Apple players have defined enough standards around each component such that consumers can easily move between various solutions (OS, hardware, cloud, app/media store) that could, on their own, be considered better than any of Apple's pieces.
Until that happens, I don't think we will see disruption. Trying to out-integrate Apple is probably not a wise competitive choice at this point. Apple continues to buy more of the value chain (e.g. Anobit), suggesting they believe more performance can be wrung out of an integrated system and help them maintain a significant competitive advantage across price, functionality, convenience and reliability.