As great as the iphone is when it comes to simplicity in interface, I think that we might just see a similar reaction to the PS3 take place. Given that nokia, research in motion, tmobile and others are all developing cheaper, yet similar capability iphone-style devices, I think apple faces a tough up-hill battle.
And don't forget Google is working on an integrated phone too.
And meizu is gonna start a price war with the m8/minione
http://www.engadget.com/2007/01/29/m...-your-engines/
The less with the Iphone will be design a great, simple interface -- but price in reality.