This is an old argument that goes back to the first batch of 1g Android phones running Android 1.5...
Android has matured, and is now the globally dominant phone OS platform. There is no way for Apple to compete with the *model* in this sense.
The reason Android does well is because if you want a very inexpensive device that does Android... you can do that. If you want a very high end device with a great build quality and impressive technical specs, you can do that. If you want an Android device that is just plain vanilla without any extra bells or whistles, can do... want an Android device with special custom skins and modifications that makes it hardly recognizable as an Android device? Can do that, too. Can, Can Can.
What are the choices with iOS? Do you want it in maxi or mini? Touch or Pad? WiFi or 3g, 8, 16, 32 or 64 GB? With or without cameras. Ok... that is it. There are your choices.
Android already IS doing what you suggest on tablets. the ASUS Eee Pad Transformer is at $399 for a 16GB device that runs circles around an iPad 2 on raw specs. The ACER A500 Iconia is only $50 more. Both of them beat the nearest Android competitor, the 32GB Xoom, which at $599 is already beating the iPad 2 with similar specs.
Verizon has refused to release numbers of iPhone sales. The industry speculation is that indicates that the numbers weren't as incredible as anticipated. Apple LOVES to trumpet numbers when they're good - so the lack of comment looks UN-good. I doubt the numbers are BAD... but when you're used to knocking every ball out of the park every time you come up to bat - those times when you only get a line run to 1st are kind of disappointing. Apple should have gone to Verizon when they were on top with no competition. Instead they waited so long that people on Verizon found an alternative to iOS in Android - and now a HUGE number of VZW are happy with the Android experience with no intentions of switching. That'll be seen as Apple's stategic mis-step in this battle, when we look back in 10 or 15 years at the evolution of the mobile device revolution.
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