Apple, on the other hand, needs to control tightly the code that goes on their phone, lest some error frought code brings down the network.
This is really a huge MYTH introduced by Jobs at Macworld speech, but it has no reasons in the real world. How can you bring down the network by whatever malfunctioning iPhone ? What can it do ? Making calls (one at a time), sending SMS (those 160 overpriced bytes of data), and using GPRS/EDGE at whopping 100 kB/s - how can this bring network down ?
iPhone runs MacOS X, similar to the desktop version. I can imagine if this platform is hostile to viruses and spam, it can generate some traffic that can be issue to the network, but in such case all of us, desktop users, are in trouble as well. Is this a case ? I don't think so.
Yes, an application can be written poorly, with bugs etc. but such vendor will go away by the means of the free market (in the long term no one wants to buy a bad SW), thus any regulation in that regard is not neccessary.
The only reason iPhone is not open for third party applications is that Apple wants to collect huge fees from the publishers and also split the revenues from the single sold copy, in the way iTunes works. But at least, there are freebies in iTunes.
iPhone needs to open up !