I don't know where this myth came from that subguns have suddenly gone obsolete but it's just a myth. An MP5 is still lighter than an M4 and as accurate out to 100 yards. Go shorter in that M16 platform on the barrel and the MP5 will have more effective ballistics. Go larger in the caliber on the subgun and it may be more effective on everything except armoured opponents and I suspect that's where a lot of the myth is coming from. U.S. military doctrine seems to focus on a simplification of the logistics associated with supply and maintenance (less types of different guns and calibers) and the notion that bad guys will be wearing body armour so the M4 is good enough to fill all roles. PD's tend to emulate the military's lead as well as society in general, which doesn't have access to SMG's. Couple that with the fact that no new SMG designs are really being offered for a variety of reasons and that HK can't supply all the demand, especially not as cheap as Colt, BM, and others can pump out M4's and well there you have it.
I've been told by a few that have spend time in Iraq that they often wished for and SMG, as most distances for engagement now are relatively short and controllability along with compactness are much better than with the M4 or M16 on full auto. Also, there's more than a few "rumours" about U.S. troopers making use of battlefield pickups in Iraq.
The SMG still has a lot of life in it and will probably be floating around battlefields for some time to come, even if we're not officially using them.