But how do you get the firmware updated on a locked phone? My understanding is all updates (historically) have required the phone to be unlocked and connected to the internet?
If in pursuit of an active investigation (i.e. the devices are still in active use), a police agency could invoke the All Writs act of 1789, and have Apple be instructed to introduce security vulnerabilities, with the next regular upgrade of iOS, such that after the phone is upgraded, it can be captured by the FBI, or whatever police force is involved, and the data recovered.
A large percentage (and presumably the the target in question) will willingly (at least today) upgrade their iOS to whatever Apple pushes out - we don't (for the most part) even question whether the purpose of that security patch is to reduce security.
The only thing that secures an iPhone is the iOS following the rules of security such as the security enclave - it can just as easily (in a new release of iOS) be instructed to ignore it.
What Apple/Tim Cook are doing here, is standing up for the importance of not being required to hodge-podge be at the whims and mercies of police agencies that demand they do whatever is required of it.
Tim Cook doesn't offer an opinion about how possible that might be. As a matter of principle, he doesn't believe that Apple should be forced to make the attempt.
That doesn't stop anyone else from doing so, however. And I suppose that the FBI could seek discovery on all requisite information, take depositions, etc, etc. However, I vaguely recall that discovery can't compel production of new work product. But maybe that's just a limitation in civil litigation.
* I guess I figured if they simply can't do it why not say "it's impossible by design," rather than argue the principle?*
Because the larger principle is what's really at play here. Whether Apple can do what the FBI asks, or not, is irrelevant. What is relevant is that what the FBI asks is bad. Even if Apple can unlock this phone because of shortcomings of the 5C (versus later model), it sets a bad precedent for later, especially if Apple truly cannot unlock the 6s and beyond ("you could do it on the 5, why not an iPhone 7?").
I'm no lawyer, but I'm of the opinion that this is a legal crowbar for later cases, and the Feds are using a tragic incident to drum up support ("you don't support terrorists, do you?")
It is, of course, possible; any iPhone can be forced to enter the restore mode or the DFU mode (don't remember which one) and be erased/reflashed via iTunes.
It won't get unlocked by that, because as soon as the new iOS takes over, it will detect the activation lock and require the Apple ID password to be provided. Also, going through iTunes erases all the data.
But presumably a custom DFU update can only replace the OS without replacing the data. The iPhone doesn't try to protect against valid updates, and will happily run anything signed by Apple; the locked/unlocked state is only about the encrypted user data on the device.
This is my question, too. Can iOS updates be applied to a locked phone? Seems like it should be a simple yes/no answer (and I thought the answer was 'no') but I can't find any clarity here or elsewhere.