"Markup" over BOM and accessories, exclusive of software, on the iPhone is much higher than 55%.

Many people don't look at the cost to develop the software/OS when places like iSuppli do an analysis. It's an extremely important aspect of pricing a product because those costs need to be amortized and recouped, while still making a healthy profit. However, these development costs don't break down per unit in a manufacturing business. The more units you sell, the better you can thin out those expenses.

The prices for the iPhone are more expensive than the iPad here in Canada. I don't know how much the iPad costs in the UK. Also, on contract, you're going to pay large monthly fees even with a throw-away phone from the Canadian providers (or if you provide your own phone). You're definitely coming out ahead on the subsidized price.

It's going to be interesting to see the updated prices in Hong Kong for comparison.

And no, an iPhone as a personal-use item is not worth $880 to me.