Maybe that should be taken as an indication that there isn't any one size that will suit everyone's needs. Some people want a phone that is larger than an iPhone and some people want one that is smaller than an iPhone. Those people are served well by other phone manufacturers who have a variety of sizes, but aren't well served by Apple who only makes one size of phone.
Apple makes their iphone screen that size because it is part of their tailored user experience (ie: you can reach each part of the phone with your thumb and developers can target that screen size) and because of uniformity (You know a case will fit and you know what to expect). If apple started making their phones larger it would disrupt that experience they built and would introduce fragmentation.
Apple does consider screen size though, thats why the ipad mini was released and the ipad itself was made even though Steve Jobs hated the idea of a tablet, so it's not entirely unplausable that they would release an iphablet alongside the next iphone, and as this document shows they are aware of the problem.
Apple has also considered the price aspect of the document too, with the iphone 5c, so time will tell what else they'll try.
