It shouldn’t really come to anyone as a surprise that the iPhone AppStore process is fundamentally broken; after all, Apple are acting as a (biased) floodgate to what goes in, and what goes out, of the iPhone AppStore.
On one hand, you have rabid Mac fanatics arguing that it’s Apple’s ball, and they can take it home any time they want to. Others point out that it’s a commercial organisation, and they can choose their terms and you can like it or lump it.
But you also have the anti-competitive angle. iTunes explicitly locks out non-Apple hardware for no other reason than enforcing anti-competitive behaviour, and apps that Apple doesn’t like (or perhaps AT&T) get booted without any recourse of action. That’s not the goal of a non-monopolistic company; even Microsoft lets any number of applications run on its Windows Mobile devices; Google’s Android is similarly unencumbered.
For some reason, the fact that the iPhone is considered a phone, rather than a portable computer, means that Apple can get away with claiming doom and gloom and the end of civilization as we know it (PDF) as well as trying to restrict free speech. However, neither of these point out the obvious that the iPod Touch is a similar portable computer with no such baseband capability; so none of the arguments about the cellphone specific damage are relevant for iPod touches.
The matter has come to the attention of the FCC, who have sent letters to Apple, Google and AT&T to ask them about the rationale behind the rejection. It’s possible that something will come from this, but it’s more likely that there will be some nefarious argument like ‘didn’t meet AppStore guidelines’ (or one of the many AppStore rejections). However, if the FCC believe that AT&T had specific communication with Apple regarding the application, they may not buy such crap.
The build-up of arguments seem to favour the creation of additional AppStores. There’s no reason why necessarily Apple needs to be the sole provider of applications; and it’s right that they choose what to host in their store. However, by also being the hardware provider (and the enforced lockdown of installation of other software) is the key objection. If other AppStores could thrive, then applications not blessed by the AppStore may be available elsewhere.
This has already happened. Cydia, the de-facto standard installer for jailbroken phones, has its own Cydia AppStore giving open source and commercial developers alike the ability to sell their wares, albeit to a smaller audience. You can get Google Voice for iPhone via the Cydia AppStore, and it’s just one reason why the (Apple) AppStore in its current form is broken. Even recent changes (such as providing keywords for applications) won’t help fix the underlying problem, which is that the iPhone AppStore has a horribly broken model for finding what you want to buy, and that almost all sales come from those staff picks and top 10 lists means that the AppStore is limited to maybe 20, 30 different apps. And when a significant proportion of the catalogue is fart applications, I think the concept of Apple defending its place as a quality control and to protect the quality of the platform is demonstrably failed.