people just don't understand why iphone users update for free. they made two years contract with AT&T and apple (a part of) for charging fee. if you don't use iphone, you have no idea how much I pay for it monthly. even you set one of three plans. so for Apple, two contract continues to bring revenue. but ipod touch is not. one time purchase. that's it because it is not a phone which you don't need contract to use. so nominal fee makes sense. if you saw iphone SDK event by streaming quicktime video, I bet Steve or another already talked about it.