so the question to ask is why didn't the iPhone 5 base price start at 32GB?
There are people who only need 8GB. Not everyone is fully using the capacity of their device.
I have an iPhone 4 I got from my company. 8GB capacity with about 5GB of free space. I only use this for work. Not much gets stored locally. No music. Only a few apps. My personal phone, iPhone 5 with 32GB capacity has less than 16GB free space.
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This brings up an interesting question. How much does it cost Apple to add 8GB to an iPad? We've been using flash like this for several years and Apple certainly has enormous purchasing power. I'm guessing that the difference between 8 and 16 GB can't be more than a few dollars for Apple. It puts it in the realm of possibility for Apple to be aggressive on this and start at 16 GB.