Other than cost (for the initial purchase and potentially to repair or replace it) and size, there is no measurable difference in performance, battery life or other function between any of the iPhone 5 models for sale (and certainly within the same carrier in case one LTE model uses slightly more power than another). The same goes for each iPhone (and iPad and iPod) model going back to the first generation of hardware.
Rather than focus on the marketing terms, I like to point out that the usable space isn't really 16 GB on the entry level devices.
A quick survey of friends has shown that you can expect the following amounts of usable space on an iPhone 5 with iOS 6:
- 13.70 GB of space on the 16 GB model
- 28.00 GB of space on the 32 GB model
- 57.20 GB of space on the 64 GB model
This is the space you will have once the OS is loaded and you start to put HD movies, 28 megapixel panoramic photos and HD quality video onto the device. I have used a 16 GB model iPhone 4 for two years and as a moderately heavy user of iOS apps for work, do constantly run low on space on the device.
I have paid for iTunes Match, and only sync one episode of the 15 podcasts (audio only) so the audio portion is really the songs I listen to all the time. I do have 200 Apps on the device, but the combined load of the data plus the application of the top 30 takes up 6.5 GB of space. The rest of the 170 apps use less than 30 MB of space (that is 0.03 GB) and they sit in folders on screens 4 and 5 of my layout taking neither screen real estate nor storage space.
Before I dive in and give some more advice, I'll leave you with one piece of what I hope is wisdom. Consider how much it costs to replace the device if you drop it on a cement sidewalk. Also, consider whether you already know how much you will spend on apps - a new user might be better off not being "phone-rich" and "app-poor" from the start. When I bought my "13.75 GB iPhone", I chose to invest in AppleCare plus rather than more RAM. Each person buying the device can certainly live with 16 GB by taking time to prune things, pay for iTunes Match and clear out video and large game apps periodically so it starts to become how much you value your time and whether you will really use the phone as a computer or just make calls and play games on it. Neither is wrong, just that we all have different use cases.
Since the hardware is identical other than storage size, each of us now has a framework to decide if you'll also have an iPod touch in a larger capacity or an iPad (I had a 32 GB iPad when I got this phone and now carry a 64 GB iPad to compensate for my phone's limited storage on the go) and want to skimp on your iPhone. By looking at where else you could spend that up charge for a 32 GB model on perhaps more apps, more insurance, or more eating dinner out. Balance how precious (and valuable in a $ sense) your time is and know picking a smaller device will mean you might have to choose what to do when it fills rather than just go on that weekend trip knowing you can take minutes of video and hundreds of pictures without having to delete some apps that you can re-download when you get home.