The short (and somewhat obvious) answer - better "performance." Not lower prices. Performance can be sustainably differentiated over time. Price is denominated in dollars, the ultimate commodity. The only way to differentiate on price is to make it lower, and all that's required to overtake you is a tweak in the cost structure and a swipe of then pen. I'm vastly oversimplifying to point of idiocy, but in essence, in the debate between "more for more" and "less for less", the answer seems to be "more at some price point that allows you to re-invest in even more."
What should that price point be? In a networked world, holding revenue constant, more users at a lower price point is better than fewer users at a higher price point. Unless it's a true luxury good whose few users include the likes of Oprah Winfrey, Kanye West and Barack Obama. Because it's better to have more free-agent ambassadors and reference points - it enables free credible marketing and PR, and potentially an ecosystem of hackers, developers, spinoffs, and feedback providers that can make your offering more valuable over time. As Brad Fitzpatrick, founder of LiveJournal once said, "Having users is the key to getting contributors. More users find more bugs and find more use cases."
I would posit that often the answer is "more for about the same". "More for about the same" is a dominant position from a price standpoint. It is net better than "more for less" and enables more network- and ecosystem-driven opportunities than "more for a lot more".
The critical questions become - "What can your cost structure support, and how much cash flow do you need to re-invest?" "More for about the same" might be "more for slightly more", but it still comes down to the affordances of your cost structure (or what your cost structure could be). Apple, for instance, has a shockingly better cost structure than its competitors, which enables it to make money from both ends - by charging higher prices as a luxury good and by constraining costs. And even Apple is finally dropping the price on their iPhone: http://finance.yahoo.com/blogs/daily-ticker/apple-cheaper-iphone-low-150045949.html
Perhaps, rather than a sign of weakness, it's a sign of greater dominance to come. At the end of the day, it will depend on what they're going to do with their pile of cash.