Everyone knows that the iPhone is an expensive bit of technology, but overall its success has shown that it's "worth it" in most places. What's interesting is that the iPhone is NOT having much success in India, where the monthly payment can't hope to subsidize the costly phone. Says Niti Bhan:
I'll say it again about the iPhone, business models need to be designed as much as the product for the market they are intended to operate in, taking the nuances of culture, socioeconomic development as well as the customer's mindset into account. That is, as Neelakantan puts it so pithily in his most recent comment, "know your customer" and that's something we know that Apple hasn't quite managed to do yet. After all, their design success is primarily through designing for themselves.
Having the same marketing story for every market world wide certainly has its advantages, but perhaps there's room for some diversity here. Then again, Apple may have its current focus on affluent markets and plan to customize and optimize things later.
I don't think a good userbase is all that important in India. Or rather, lots of iPhone users in India is not the reason I see for Apple to have the iPhone there. Lots of iphone developers, on the other hand, is key. Especially since a good portion of the iPhone 2.0 OS is aimed at the corporations, who would want a large pool of consultants to build their enterprise app for them.
You used to be able to beat Apple by making a similar product for a lot cheaper, but amongst all the hype for the first iPhone, Steve Jobs said he wanted to get the price for the phone down to $99 eventually.
And in the most recent conference call, he talked about not wanting a "price umbrella" that allows competitors to undercut them on price.
Apple might not fully grasp how to market to India specifically, but I think they long ago got the message that they'd need to compete at lower price points. I think it's obvious they're going to round out their line with a lower priced phone.