Except it isn't. There is no fundamental technical limitation that prohibits Apple from allowing third party app store. It's only because of their arbitrary policy.
This simply isn't true, the market is too diverse to make any assumption like you just did. Some do upgrade based on "hardware specs." Go ask your mom what mhz are. Yea, I'll wait.
iOS is the large reason people choose iPhones over Android. The phone is simply a portal to iOS.
Without the OS the phone is essentially a brick. To argue the hardware is the only product is an absolute falsehood.
The App Store didn't exist before iOS, it was created for it. It is not a separate product.
None of these questions get you anywhere. You made the claim that hardware was why people upgraded - which is false because of the diversity of the market and the fact that the hardware is only a portal to what they want. You haven't dealt with the argument - that the App Store is a separate product from an iPhone. It isn't.