The post also fails to give any examples whatsoever of how apple is actively encouraging the cheap/free apps. One might argue that they kind of discourage it by charging the $99 fee to join the program that lets you post apps. Apple makes it so that it costs you money to give away your programs.
The apps are a marketing tool for Apple. While they make some money reselling them, I can't imagine it's enough to get stockholders excited. All the sound and fury regarding app rejections and keeping the riffraff (Flash) out has more to do with brand management than technology or protectionism (not that Apple isn't protectionist...)
That's not to mention that the cost of apps is so low compared to the expensive iPhone/iPad that they are already effectively commodities. Unless you see a lot of $30 apps running around, which I don't.
Right, but that's kind of the point. Apple has already commoditized the app market. Some apps cost a lot in terms of developer time, but you can't realistically charge more than $5 per app. I think there's still room for prices to sink lower though.
People can make a living off the app store. A handful of people get very rich, and many don't. It's not different from any other market.
That's not true in the professional app developer community. Hobbyists can make golf-money on the app store, and of course everyone likes to point out the few runaway success apps, but anyone professionally making games, for instance, knows that the business case for iPhone development is weak if you're not one of the really big guys like EA.
Indie game devs are far more interested in Facebook. Mobile is still more work for less pay and everyone seriously playing in the space knows it.
This next bit is anecdotal. There's so much shovelware and apps without polish on the app store, and many of them typically reflect this free and $0.99 price point. I'm starting to see trends of quality apps that originally priced at $0.99 to compete, changing their price points to $2.99 or $4.99 because compared to the competition, they're apps are of a premium and well-maintained quality.
The average App Store customer buys less than $20 worth of apps last time I saw numbers quoted. 30% of $20 is $6. Apple is a hardware manufacturer that sells $X00 phones at one of the highest markups in the industry and also gets a kickback from AT&T for every customer they bring to monthly billing.
Apples' incentives are almost totally non-related to developers' incentives: their primary interest in apps is to move more hardware and contracts.
Okay, how many of them are making a serious profit? How many are breaking even? How many are profiting primarily due to an existing customer base? (I'm thinking of Pandora as an obvious example; they're making money off of Apple's platform, but they were making money before they wrote an iPhone app.)
The high-volume cheap apps (free to $10) are for the general public, and in that area, the blog post is correct - Apple is mostly interested in competition resulting in cheap and good general-interest apps, because it enhances "there's an App for that".
If you want to sell a $50+ iPhone app, you need to look at niche fields. There's a bar exam prep app for $1000, and one of the apps demo'd before the App store launch. In general, the really expensive iPhone apps add a killer-app feature - a feature that justifies buying the iPhone itself. Like the "check your security cameras while patrolling" app, or the "every medical and pharmacological reference ever written in the palm of your hand and instantly searchable" app (#8 on the list in ) or the "control your multi-thousand-dollar home automation system" app from ROSIE. These types of Apps literally sell iPhones by themselves. I mean, the tuning forks you need to tune a high-end piano cost $450, so a $300 app which is a million times easier to use is a no-brainer if you're a piano repairman or performer.
 - http://www.edibleapple.com/bar-exam-preparation-app-for-the-...
 - http://www.businessinsider.com/the-10-most-expensive-iphone-...
 - http://www.businessinsider.com/most-expensive-iphone-apps-20...
 - http://www.mypianoshop.com/store/product.php?productid=16630...
but they face an uphill battle against the monetization of mobile adsense