If the owner refuses, then the government at least has to break into the house.This is the way I see it. I will use an analogy. To me the phone is a locked house with file cabinets in it. The file cabinets are the digital files on the phone the authorities need to investigate the crime further. A judge issues a search warrant that the locked house can be broken into to obtain the files. This happens all the time and I think most everyone would agree is acceptable.
How is this iPhone issue any different? I'm really asking because I haven't followed this issue too closely.
In Apple's case, the government wants the lock designed so that a skeleton key will open everybody's house and they promise to only use it to find terrorists. Hopefully criminals don't stumble across how to make their own skeleton keys.