Sounds like MS is gonna make the same mistake with the iPod again.
Yes, I think most people have been agreeing for a number of years now that as flash memory gets cheaper, more makes its way into the phone and the only things to really eat that capacity up are music, photos and video. Look at any other contract phone out there and you already have contacts, calendar, internet etc. Apple will improve on the usability of this side of things, but won't be bringing that much new to it.
Apple aims for 1%, which is far less than Ballmer just predicted, and represents a massive number of customers.
Beyond the 1%, lower-end iPhones may well appear... and 3G is a definite, as already announced by Apple. So are other countries--on track for this year.
As for price... what's the monthly penalty you pay to subsidize those other phones that have nowhere near the storage (to pick just one feature) of the iPhone? They cost less for a reason.
I expect Apple will sell as many $500 iPhones as they can make. Then I predict they will sell cheaper versions.
I agree with all but the statement about monthly penalties. From what I've read, the iPhone won't exactly be on a significantly cheaper tariff. In the UK I would predict the $499 would end up as £299-399 assuming identical conditions. With the very top end phones here being about £100 plus £50 a month rental, the iPhone would have to be available for say £35 a month to be equivalent value. Sure it's a better phone, but you can pick up 4GB of flash in a card for next to nothing these days.
As for 3G access, in this country unless you buy data bundles it's barely worth it. Wherever I am these days wanting to get online, I can guarantee about 90% of the time there is wi-fi access. I would take that over 3G every time, given the choice. Both of course would be better.
Microsoft need to wake up and realise that Apple make their money from hardware, software helps to sell it. If Apple sold 3% of the 1.3 billion phones, Microsoft scraped to 60% and Apple made up to $250 per unit and Microsoft maybe $5-10, Apple would be making equal to double the profit of Microsoft. Double the market share for Apple would be even worse to compare, ($3.9-7.8billion to Apple's $9.75billion).
Now I know Windows Mobile probably earns Microsoft more per unit, the iPhone will probably bring in less and those figures are speculation, but I used the 50% profit quoted earlier and assumed very little for Microsoft because to get that many devices running WM6, they would have to heavily subsidise and discount to get into cheaper end phones.