Here's the thing. What is not emphasized here is along with the 2-year contract (which came also with the iPhone 1st gen btw), there is an increase of $10 on the data plan -- from $20 to $30/month on top of your voice plan.

But then again, let's not forget how apple has made the iPhone so user friendly. As an end-user who don't know anything about the iPhone, you just know that if you want to purchase music, run the iPod within the iPhone. Same with apps -- just run the App Store app and you get to download free and commercial apps easily.

Now, they've introduced MobileMe which works perfectly with the iPhone. Anyone who watches the MobileMe Guided Tour will get it. It explains how 'push'-ing really works -- something MS never did with Exchange, with regards to targetting the end-users.

Now, you have the GPS built in running on top of the Google Map app, which also seamlessly integrate with the contacts app. You also have security beefed up, as well as now ready for the enterprise. Oh, and iTunes detects if you need to update the iPhone's firmware and it will let you do so with just one click -- very en-user safe. And of course there's the excellent Apple support (which I hope thy carry across the planned 62 countries).

I guess what we can see is how important integration is, and how end-user focused Apple really is. You'll be amazed how people don't mind paying for a premium as long as you get what you pay for.