No need for more storage capacity, Apple is moving AWAY from local storage.
ie iCloud, iTunes Match, possible streaming service.
Don't we acknowledge that the future is moving towards ultra portable and light streaming/cloud based devices?
People say the same thing about Google's Nexus devices having a minuscule amount of storage (e.g. Nexus 4 with 16GB as the bigger option; or the GSM Galaxy Nexus only having 16GB -- which is one of the many reasons I bought an iPhone 4S instead). Personally, I want the biggest storage option I can get. I currently have the 64GB 4S, and I would love to have 128GB or even more! I shoot a lot of video and the more I can store on my phone the better.
Also, I still don't have enough storage space to store my entire music collection, so until that happens, give me more storage. I've tried iTunes Match, and it was horribly unreliable (though this was a while back). I use Spotify a lot, but I still can't get a song playing as quickly with it as I can with my locally-stored music (even Spotify lets you locally store the music). Often times, Spotify just doesn't start playing, and I just have to give up on it and switch to my locally stored music. Any time I rely on anything wireless, it's just not going to be 100% reliable.
I like cloud services, but I think they are complementary to local storage, and the future involves both massive amounts of storage on a tiny device coupled with constant connectivity. I, for one, want the best of both worlds in this regard.
For example, I love that my photos get uploaded to iCloud automatically. But I also love that I have thousands of photos on my iPhone itself that I can quickly browse through. I periodically run out of space with 64GB, so please give me more! The speed of a wireless connection will likely never catch up to the speed of local storage (especially latency), so please don't force me into using an inferior storage medium as my primary storage.
I think in the future we will see higher storage capacities in smaller sizes, so why not keep increasing this?