iPhone is a very nice project, well designed and manufactered, but the market addressed is
an hard bet for Apple.
Big players are already on the ground: Nokia, Motorola, Samsung and Sony for instance.
So it is difficult to play in such market, and some analysts said "the touch screen was not successful for GSM/phone products".
The launch of "iPod touch" addressed this fear in my own opinion, because the design of the iPhone is very cool, and you can try to at least have it survive ipod-izing it.
Last and more important factor, the iPhone is locked by one carrier in U.S., and the same will happen in U.K.
This is a very greedy move; big player like Nokia are trying to unbundle their product form the carrier, selling phones which can use multiple wireless network (wi-fi, skype, gsm/edge/umts).
Google is doing the same, from the software perspective using the Android project.
So Apple is always smart, but in the portable phone market you must be also price-affordable, fast in releasing new models, and open for working with other competitor.
All things Steve Jobs is not very good at the present time.
Update: At April 2008, Telecom Italy will carry on UMTS iPhones in Italy. I will write an article on them, to understand if the product is a bit less locked.