When Android begins springing up on other handsets and computing devices, this argument will be moot.
Apple wanted to create quality products much like BMW does with cars. Microsoft is the dominant operating system because of it's flexibility toward hardware. This may change, but for 20 years, it's proven successful.
Apple wants a quality smartphone. The iPhone wasn't the first smartphone, nor the first touchscreen phone, nor the first phone with an operating system, nor the first media hyped phone, nor the first phone with an applications store, nor the first phone with iTunes, nor the first music phone and certainly not the first phone built for gaming. It is successful though.
I assure you, the ultimate goal for Google with Android isn't cell phone domination, but Microsoft domination. Android will find it's way onto the desktop for cheap. And Android will not be tied to hardware. Apple has a strategy for quality, which I have enjoyed for years. Exclusivity on AT&T (which is a terrible company for many reasons; wiretapping, lousy customer service, high fees etc) and resistance to support diversified design are making Apple lose it's luster in my opinion.
I own a G1 and I use T-Mobile. Both have been fantastic. T-Mo even unlocked my phone knowing that I won't leave them, whereas AT&T would jail you over leaving. I am a long time Apple fan, and I have been a huge Apple supporter for years. I have converted many, many friends and family members.
Apple has refused to diversify and has become this company, like the robots in Asimov's world, that does what they feel is best suited for us. Look at their acceptance of the multi-button mouse. Anyone with accessibility issues using an iPhone? For an influential company like Apple and all their resources, it is shameful that a single device is what's best for EVERYONE. Especially shameful because Apple was once the frontrunner in accessible design.
I hope Android gives Apple a run for their money. Heck, I hope they all do, Apple needs all the competition it can get. As much as I admire and respect Jobs, I believe now is a good time to hand the reigns over to a new, much younger leader. Do yourselves a favor and be a little more critical. There are other people out there with less money, bigger needs and less opportunity. If Apple ignores this, they will repeat their 90's collapse.