Heh heh, you seem to forget that Apple has been doing this 650 for current gen, 550 forever. You can make the same argument last year that no one would buy 4s for 550 unlock ( or 100 with contract) when 5 only cost 100 more. But the market said differently. About 1/4 of all IPhone sold last q was 4s at 550. Just because you won't make that choice does not mean others won't. This 5c will do better than 4s last year given that it has multiple colors, new exterior design and support China Mobile. And don't forget Docomo as well.
Apple are trying to swim against the tide of commoditization. They can do it - at a massive cost. They could be like a Burberry and sell fewer clothes at high margins. Fine. The problem is that technology is not clothing. Market share matters. Universality matters. Interoperation matters. Look at MS Office - it's been nigh on impossible to get rid of it in the last two decades, no matter how bad the software gets, because the file format has so much market presence. Look at Macs - still in single digit market share and they have to sell it as being capable of running Windows because so much existing software can't easily be rewritten for MacOS. Trying to artificially prop up margins on the 5C, and even the 5S and the storage capacity markups, is repeating the mistakes of the past. Higher prices for higher value will sell - taking the piss with the 5C won't.