They don't want the bottom market... yet. As mentioned in the key note, they are aiming for 1% of the cell phone market. This is a high-end luxury good, not some phone they give you for free for joining the network.
They are following the ipod strategy, start out with a small niche market as the best, new, ultra-hip toy. Perfect the technology, expand, and offer something for the bottom end (a la ipod shuffle). They changed the name of the company for a reason...