In the UK you can buy a good spec Android phone without contract for £100 (one of the Huawei models).
I personally wouldn't shun an iPhone at a similar price point (I find them more polished but too expensive for my budget), perhaps I'm an irregular customer though.
I kept reading before launch about the $100 phone Apple was launching and was excited. But to my disappoint I later realised it's $100 + ridiculous contract (apparently the notion of contract free phones doesn't exist in the US)
I think if Apple launched a "budget" phone it would destroy much of the Android market. Maybe it would damage their brand though, who knows.
I personally wouldn't shun an iPhone at a similar price point (I find them more polished but too expensive for my budget), perhaps I'm an irregular customer though.