Yes. I have no intrest in a new phone if I have one already. Even if it is free. Why would I spend the effort for a free phone I do not need or want? Even if it is like six steps out of my way. Why would I need one? I don't, so I don't go to get one.
Ladies and gentleman
The utopia defender
Not necessarily. If a grocery store hands out free samples, or if a publisher hands out free copies of the newspaper, there are still plenty of people who pass it up, because they don't need or want it.
There is indeed power in saying no. And doing that does not devalue the food of the grocery store or the newspapers as long as there are enough people to say yes and go along with the producer's goals.
As for the phone analogy, even if it's free, there's still getting accustomed to the phone, having to deal with a specific kind of customer service (after all, not everyone has the same experience), differences in utility and durability, and we're also assuming that iphones will someday have the same hip prestige as well (which will no doubt change if they're being handed out for free). And nevermind trying to buy the appropriate compatible accessories, which were not stipulated as being free.
Plus, if the number of people who get iphones increases exponentially, if it's not taken into account properly, that also means customer service wait times, repair jobs, on-site tutorials, et all. will also increase. And apple's relationship with app developers might also fundamentally change; if some are Android exclusive because of the market change, and you're an Android fan, then you're even less likely to accept a free iphone.
So in summary, there are other factors at play aside from straight up cost. There's also indirect cost, and non-financial cost as well. And then there's also sentimentality or brand preference, which are human factors that aren't driven by money.