I can't see that happening, to be honest. The only way I think Apple would ever do it is if they 'froze' the iPhone in its current state, and eventually it would cost practically nothing to manufacture, and they'd maybe do it then. But even in that exceptionally unlikely circumstance, I don't see it happening. Apple will keep upgrading the iPhone every six to twelve months, which will in turn mean that we're going to keep paying for it.
Apple is having it's cake and eating it just now: it gets a cut of every contract, every month, and it gets a whack of cash for the phone itself. Eventually, the contractual percentage will dry up, and they'll be left with only making money on the phone. For that reason, I think we'll never get it free. However, I don't actually mind paying for it: it's going to be £269 over here, which is the same as a 16GB iPod touch. Granted, it's only got half the storage, but it has the phone, the EDGE internet, Mail.app and it's all-in-one. I think that those are more than worth sacrificing a few gigs of storage for. Besides, I'm never likely to ever want to carry 16GB of entertainment with me, ever.
I would like a TV out on the iPhone though...