Why 5" 1080p phones are wastefully large
Phones with 5 inch, 1920x1080 screens are quickly becoming the norm. Manufacturers have never really provided a good reason as to why the size of phones' screens need to grow so large; it's just assumed that a bigger screen is better for people, a philosophy that I do not think is grounded in reality, and, perhaps more sinisterly, it requires a larger body that makes it simpler to fit in ever-increasingly powerful components, and provides more space to fit a large battery, thus, reducing the need to design the inside of the phone as carefully as a smaller chassis.
The important thing to ask is whether 5" phones take advantage of that extra screen space afforded to them, and to do that, we'll be looking at Android's resolution independence.
Resolution independence is a hard thing to understand, because of a lack of clear terminology around the concept, which forces the use of convoluted phrases. See this "This is my next Podcast" for a discussion where Josh, Nilay and Paul confuse themselves on the topic.
Resolution Independence was introduced by Android 1.6 "Donut." Previously, the operating system only supported 480x320 screens (identical to early iPhones). In this process, the 3.2" 480x320 HTC G1 screen with a pixel density of 160ppi became the baseline that the rest of the system was based on.
We now have settings for low (120ppi), medium (160ppi), tv (213ppi), high (240ppi), extra high (320ppi), and with Jellybean, extra extra high (480ppi).
The operating system scales interfaces by a certain amount for each setting - 1.33x (tvdpi), 1.5x (hdpi), 2x (xhdpi - this is pretty much what Apple's retina displays do as well), and 3x (for the new xxhdpi).
Of course, things are never that exact, and screens use the closest available density - the Galaxy Nexus' 315ppi screen, for instance, uses xhdpi (320ppi).
This is an important part to remember: if the screen's actual ppi is lower than the ppi of their density setting, (e.g. a screen of 300ppi using a 320ppi setting), the operating system will "overscale" the elements - they'd be physically larger than they should be. This is because the operating system thinks it's scaling the interface for a screen that is denser than actually is. Whilst this might be good for those with poor eyesight, it's an inefficient use of space on a screen that is severely constrained in space. Conversely, the opposite happens when a screen is denser than its density setting.
By this logic, if you took two screens of identical size, but one had 180ppi and the other 300ppi, the 180ppi screen would in fact, show more content. It would show more lines of email (won't sure an extra line of apps, though xP). The only exception would be desktop web pages, because they are automatically zoomed out to fit on the screen (density doesn't matter), and stuff isn't a blurry mess on a high resolution screen.
Interestingly, this also means that a 4.3" 720p phone shows exactly the same content as the Galaxy SIII's 4.8" screen, it's just that on the larger screen, things are easier to read.
So what about 5" phones?
5" 1080p phones have a ppi of 440: [ sqrt(1920^2 + 1080^2) / 5 = 440]
They would presumably use the xxhdpi setting of 480ppi (I'm not 100% sure because I don't have the DNA, but that's what I would assume - if someone has the DNA, you can find this number in the build.prop file on your phone). This means that elements on the Droid DNA/Xperia Z/Galaxy S IV are displayed physically larger than they should be.
So what's the ideal size for a 1080p phone?
Ideally, you want a screen whose density is around 480ppi - larger than that and it's simply wasting space, and going smaller would present a legibility problem to many, I'd assume.
The optimal size would, in fact, be around 4.6" (replace 5 with 4.6 in the above formula). 4.6" is the size of flagship phones from yesteryear. It's the size of my Galaxy Nexus, and it's about the largest size I would consider.
A 4.6" 1080p phone would display the same content as a 5" phone, because they have the same resolution and would use the same scaling, but it would fit in your pocket easier, and it would be easier to use one-handed. The downsides to a smaller screen? More zooming required on webpages and less immersive videos, but to be honest, webpages and videos are better handled by tablets than phones.
However, it's probably not possible for us to produce 4.6" 1080p screens in any large-scale way at the moment, because of the way LCDs work.
Whilst the above shows that 5" phones are wastefully large, there are other reasons why I don't think phones should be so large - the things a large phone do better than a small phone, a small tablet does even better - and they have had their software optimised for tablets, too. Think about that.