Not quite - the LG Prada was the first phone with a capacitive touch screen, not the iPhone. Before the first iPhone came out, I was using an HTC phone with a slide-out keyboard (the TyTN, if I remember correctly). That one already was a full-fledged smartphone - and at that time, there were numerous other ones on the market, mostly running Windows Mobile.
The iPhone was much nicer to use, though.
Have you actually seen the LG Prada in action? It may have used a capacitive touchscreen, but it was a dumbphone with a terrible interface. And that's aside from what's been mentioned in terms of the timing of the design (clearly the iPhone was in development long before the Prada came out).
Of course there were smartphones before the iPhone, but they all used similar concepts. Tiny screens, hardware keyboards, styli or roller balls, etc. And that's the direction Android was heading before they introduced the iPhone. I can't emphasize enough how amazing the keynote address where Steve introduced the iPhone was. I recall some people in the industry literally saying that it was impossible to make this product. That's how blindsided some of them were.