Well, the iPhone raised the bar. Anything that doesn't meet this bar (i.e. BB Storm) gets **** on by critics and public with the simple comment "It doesn't do XYZ as good as the iPhone".
This is a perfect example of the positive benefits to the consumer of competition. All of our cell phones -- even the so-called "dumb phones" -- improve because of the presence of such products as the iPhone, as well as it's reasonably popular implementation of various specific functions.
The iPhone has kept its appeal because it has remained consistently approachable not to mention the unsung teammate/hero "iTunes". iTunes is likely more responsible for the iPhones extended success than any other feature that the phone has rolled out since its inception.
It's not so much that I totally disagree with you on this point, but rather I think you've the shoe on the wrong foot. iTMS is designed to leverage certain key features of the iPhone, one of which is application deployment. The fact that people can buy music and videos straight off their iPhone is almost an after-thought. I'm not saying it isn't important, but more that it has its place.
Even with the Pre and Storm 2 and HTC platforms on the horizon, it is hard to get excited about new options when new options aren't necessarily in demand (i.e. people are happy with the iPhone).
With this I absolutely agree. A really good parallel to this would be the whole "digital hi-def tv" situation of the past several years. It's not that high-definition video broadcasts are undesirable -- and how can you argue with the quality once you've seen it -- but this wasn't something the general public wanted. This is something that was foisted upon the general public as a result of the actions of the players in the broadcast industry trying to fight the FCC, and this whole situation goes back to the 1980s. Anyhow, getting back on the point of this post and this thread, the main reason I think for the popularity of competing devices -- the Android, the Prē, the still-born OpenMoko, etc. -- goes beyond the mere featureset or user experience of the iPhone. There are other practical basis for it, such as wanting background processing, push capabilities, or telnet/ssh type stuff, or a different carrier... In other words, it's not necessarily a rejection of the iPhone as a physical device, but how Apple is delivering it.
I'll give you a couple examples. A friend of mine looked at getting an iPhone but needed AIM to be able to work at all times. He wanted to be able to run some background apps, and he needed a terminal capability so he can get into some of the servers he runs to do work when he's out and about. Secondly, let's look at me. I don't necessarily need those features, but what I do need is carrier independence (well, at least independence from AT&T) and I also want the iPhone delivered as a CDMA device. Clearly, Apple is going to do neither of those things (certainly not any time soon) and so the iPhone is just not an appropriate solution for me. But if they offered it through Sprint, I'd jump at the chance to get one.
Obviously I'm not going to commit to buying a Prē until I know totally what it's like, how the UI is, how it renders web pages, are there any limitations or restrictions thus far unpublished, etc. But for the moment at least, and nearly sight-unseen, I'm seriously considering it as my next cell phone.