The guy that wrote that article is completely wrong, his article demonstrates nothing about product differentiation, he's not a product manager and it's obvious why.
That said, everyone keeps assuming they know what the rumoured 5C will be, but I think if Apple stays true to how they've expanded product lines in the past the 5C will be nothing like what most everyone assumes.
The iPod Shuffle isn't the cheaper iPod Classic just as the Mac Pro isn't the more expensive iMac, they sport vastly different feature sets which just happen to carry different price tags, but if the only thing you can see is price tags being what differentiates those products then you can go join the likes of the author of the linked article in the Land of Clueless Armchair Product Strategists.
Don't get me wrong, the question (i.e. thread title) is a good one I think, but if the assumptions are wrong (as most I think are) the conclusion will obviously be wrong. For just a moment assume Apple knows how to differentiate products better than you or me (they're actually excellent at this), it's safe to assume the 5C won't cannibalise the premium 5S sales or tarnish the brand but will reach new demographics the iPhone would never normally reach. How will they do that? I guess we'll have to wait a few weeks, but I wouldn't doom them just yet. Personally, I can't wait to find out.