This isn't that surprising to me. Most people still want a cheap phone. They don't want a $200-$400 subsidized phone. They want a $50 phone or a free phone. I suppose they'll pay up to $99.
Now that the name iPhone has all of these brackets, there's almost no need to go with one of the other, cheaper guys, because there are no other, cheaper guys. Apple has never done this before -- become a name of high quality and offer insanely cheap price points, but there you have it.
Again, most people (not the geeky MacRumors crowd) want a touch screen phone so they can use Facebook. They don't care what the OS is, but they know the name iPhone better than they know the millions of Android varieties.