Two reasons for that. The subsidy of course, but also ignorance.But also am dismayed at how many people actually believed that is what they paid for the phone.
With the exception of many members here who are into their phones, the average iPhone buyer has no idea what they are buying beyond the physical look of the device. That's changed somewhat in recent years as app sizes have increased and that's forced people to start paying attention to their storage.
But, I would argue that the average iPhone user didn't give a second thought to 16GB, 64GB or 128GB. They just wanted a cheap iPhone and the "$200" iPhone is the 16GB one. They don't even bother to wonder or inquire about the cost of the higher capacity iPhones.
Now that this is starting to bite people in the ass though they are starting to pay more attention - and realizing that if they want their $200 pipe dream iPhone they're going to be paying for it by spending a lot of time managing it.