$35 isn't that cheap anymore.
Boost can be as low as $40 for completely unlimited usage, though on the same network. Straight Talk is only $10 more for unlimited, and generally much better/higher data speeds. T-Mobile is $5 less for substantially better data, though with pretty rough minute limitations.
Their phones used to be really cheap too, at least by comparison. The OV was a relatively great phone for "cheap", at least back then. But android phones are getting cheaper and cheaper. A brand new GN is only $350. You can get SII's brand new off-contract for $300. Yet Virgin is introducing a new single-core phone at $250. They've released two phones at the $300 mark. That's not that cheap anymore. That's premium android territory.
So people are paying relatively a lot for phones, relatively a lot (or at least not dirt cheap) for the plan, but their data speeds, connectivity, and upgrade record have stayed the same (or gotten worse).
I think there is more expectation that you have 3G data consistently. And that updates are issued for obvious phone problems, or that phones they are still selling not be on Froyo with no upgrade path in sight.
The "magic" of an Optimus V for $150 on a $25 plan, when many Android phones cost $300 on contract with an $80+ plan, well that's gone. Those days are over. Virgin needs to deliver more now than they used to.