So people do not think that iPhone upgrades year over year is worth a yearly upgrade cycle, but still an overwhelming majority want to upgrade regardless. While I agree that iPhone purchase every year is and should be reserved only for Apple fanatics and Technology enthusiasts, you should be living in a cave if you are not upgrading every two years at least, i.e., if you want to continue with the iPhone. This makes sense in a lot ways (check this article for iPhone's resale value and on why you should always upgrade at the right time to get most value for your buck).
There are a couple of important reasons for Apple not to do a substantial upgrade every year or release just an improved version of the iPhone every other year than a complete overhaul. One is that the improvements in processors and general upgrades in performance do not jump significantly in one year, rather in two years these improvements are more significant. Also the two year contract scene in the US is another major reason for Apple two year iPhone cycle. Customers are stuck in a two year contract every time they buy a new iPhone and it only makes sense for Apple to release a substantially improved iPhone every two years instead of every year.
In my previous article on potential hardware improvements that I yearned from iPhone 5, I had mentioned three most important things, bigger screen, better battery life (and performance in general) and better camera. The response from this survey jives well with my list. Though a new iPhone 5S or 5C is not needed for iOS 7, experiencing iOS 7 on the latest and the greatest iPhone hardware makes sense.
This list also suggests that there aren't many things Apple can improve upon iPhone 5 for the next gen iPhone and like I mentioned before this is when you realize what a robust smartphone, iPhone 5 is!
Finally looks like even in the US there is a solid pre-release demand for the iPhone 5C!