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That is simply the "slack" space needed to download iOS 8 and install it inline on your phone. The OS does not consume 6.9 GB of your 16 GB model. See the Ars Technica review

I know that (it still does consume more than iOS 7 did, but not 6.9 GB of course). But it's pretty inconvenient to have to delete more than half of the contents of my device for the update.

Then don't update over-the-air. If you plug your iPhone into your computer and update via iTunes you don't have to delete anything from your device.

Well, 1.1GB for the file, and 5.5GB for the installation.

That's still huge.

I think that if you tether your phone to a computer and use iTunes to do the upgrade, you don't need as much space, since the install files can be buffered on the computer instead of your phone.

Yea, now I'm seriously considering the 64GB version for my iPhone 6 upgrade.

Is this the same case if you upgrade using iTunes and USB connection?

Nope.

I was able to upgrade via iTunes and USB with only 1.5GB free space on the phone.