That's what happens when you stop innovating (and looking around at competition) and start competing on price. When all you have to offer is lower price, you're already halfway downhill.
So what happens next year when they offer data service that is a order of magnitude faster than 3G? Are they still not innovating?
LTE is promising 50-60 mbps, but field trials are showing 8 to 10. Would you drop your AT&T iPhone for that?
Aren't iPhone users already selected for data rate insensitivity, considering the history of both the hardware product and AT&T's data performance?
I wouldn't replace my PC with a glorified set-top box just to get FiOS service either.
So even though they don't seem to be innovating or seem cool to hackers, and that from our perspective they are heading "downhill" ... from a pure business perspective, they are succeeding, aren't they?