The major issue for the industry here is not that free-to-play games are crowding out the "higher quality" titles. Those same games have a strong foothold on other platforms as well.
The actual problem is a failure to deliver combined with a failure to market. We've not seen many successful high-quality mobile titles because developers are failing to position their offerings correctly.
Mobile is a high-risk purchasing environment (despite costs being low, it's a perception thing) suffering from classic information asymmetry. You have no way of meaningfully getting to grips with what you're about to buy, and there are no refunds. It's unsurprising then that most purchases are low cost and driven by recommendations or wisdom-of-crowds popularity contests like the app store charts.
What developers (and the app stores) desperately need are better ways to resolve the lack of information that buyers have, to better communicate real (rather than faked) quality, and to assure players that their limited time and money will be well spent on this game they've never heard of rather than the bird game that everyone's talking about.
Coming from AAA, Fireproof always viewed mobile as open, accessible and democratic, a bit of a playground for video game possibilities. When the platform first came onto the dev scene its promise was insanely cheap development costs and a liberating ability for game makers to sell direct to the public. The benefits were dizzying and AAA gaming wanted in, thinking its superior visuals and design chops will crush the "cheap, Facebook-y" type games that were becoming popular on mobile. But the truth is that the first few years of AAA in mobile were dominated by the catastrophic failure of expensive paid titles. Our industry completely failed to grapple with the newness of the platform, seeing the great novelty of the touch Interface as a pain instead of a new opportunity. Ongoing deep losses coupled with worldwide austerity shrank budgets industry-wide and the view shifted to software that showed high return on low investment. Over time rich, immersive games faded away as an option and in the right light those "cheap, Facebook-y" games looked pretty damn good after all.