Why is the true price of the iPhone more expensive than the iPad?
And of course there's now competition. Back in 2007, Apple can just sit on their asses and go 'here's 3G', and people will gobble it up. Now they actually have to listen to demands of people who want android - this is why the iPhone 5 has a 4 inch screen, 4G LTE, A6. Without Android, 4G and the A6's for the iPhone 5S.
Just look at iPhone 4. Shiny new look, one new camera, essentially the same performance as the 3GS.