I think it's a combination of things... poor network and limited hardware
I live in the UK, but I recently have been to the US and Canada with my iPhone. I am on O2 and in our rural home setting, I have very poor reception. Nevertheless, it is enough to cover most parts of the house with minimal signal (1-2 bars, no 3G). Most of our phones had problems with this, but I think we have more dropping phone calls with the iPhone. It is not dramatic, but it is noticeable, a minor annoyance. Furthermore, recently I stayed in Central London and a friend of mine had his HTC phone with him. The iPhone's GPS regularly placed me to south London or streets away from our actual location. The HTC seemed to have handled the situation better and faster. The iPhone is getting dated, there is no question about it. Two and a half year (or two, in case of the 3G) is a long time in telecommunication. That is why I expect some minor cosmetic changes in the next revision. These devices demand larger aerials/antennas/loops. I haven't got any experience with the 3GS, but I saw some threads claiming similar problems, concerning fluctuating network signal strength.
When I used my iPhone in various large cities in the US and in Canada, I've had a completely different experience. Service WAS significantly poorer. Most of the times my iPhone connected onto AT&T's networks (not in Canada), but data roaming was ridiculously slow and unreliable. In fact, I was wondering, why people even bothered with any smart phones, especially at that price. I paid £340 (around $540) for my 3G, with unlimited internet for a year, on a 'pay-as-you-go' card. I've had another iPhone in the past, but I didn't want to tie myself into a long contract with a phone that I always knew was not the best for making calls. I still use my Nokia for making phone calls. It is stupid, but that is the harsh reality. My battery wouldn't last half a day otherwise.
Most of us believe in the free market and competition. With these exclusive network deals, tie-ins and restrictions, I wonder, whether that is really the case. I had to go to the US to see that it is actually the land of monopolies, not the free market.