lol, but it did exist. TBH, when MS started their phone efforts, I think even Symbian was still around, and other operators had their own pet projects here and there - which is what the status quo was like before the iPhone anyway. So MS knew very well from the start that they had to be better than existing competition, they couldn't just stroll in and hoover up the market.
WP was a pretty bad MS fumble. They had the brand and the market clout to nail it, and they lost it to a competitor that all but followed their original Windows blueprint: give the OS more or less away (with Windows, through tolerated piracy; with Android, through opensource licensing) to get de-facto monopoly, and then leverage it in more lucrative areas (for Windows, Office and enterprise software; for Android, Google's own services and datamining).
This gave them the sense of ownership of the devices. It was theirs and the device did whatever they wanted. If you didn't want anything to do with Google - you could.
iOS was walled garden. Microsoft also tried to make WP into walled garden, controlling, what's running on the device and getting their cut.
It changed during 2.2/2.3 era, when it became mainstream. With 4.0, even the hardcore early adopters didn't bother anymore. At that age, the OS was already well established.
Back when 1.x shipped, all internal storage (emmc?) was dedicated to the firmware/os and apps.
user data like images and music were expected to be stored on an SD card.
But later OEMs started partitioning the emmc in two, with the smaller partition housing the firmware and apps, and the larger being mounted as if it was an SD card.
Come 2.x this got official blessing, with the introduction of "move to SD" (more like "copy some static data to SD").
But people found this to be constrained, so they would root and use tools like LinkToSD to basically set up a EXT partition on an SD card and move whole apps there, using symlinks or something to make them appear to still be in the firmware partition.
Come 4.x the user data partition was replaced with a union mount. Thus writes to /sdcard ended up somewhere else in the FS. Later versions piggybacked on this to provide support for multiple users.
Note that 4.x was also the intro of MTP for wired data transfers. This because earlier the "SD card" had to be unmounted from Android to allow a PC to access it over USB.
And now we have the Storage Access Framework, that piggyback on the plumbing introduced with MTP to offer apps limited RW access to storage areas without the need for certain permissions.
When Windows Phone 7 and 8 came out, other than Android what other alternatives existed for OEMs to use as an OS to compete head to head with the iPhone? There was only Android. Without Android, in 2010 and 2012 they'd have had no choice but to form a queue and sign licensing agreements with Microsoft for 7 and 8.
Even if the Pre had succeeded, that wouldn't fundamentally have changed anything because it wasn't a licensed OS, aside from the persistent hardware and software quality issues that held it back. Microsoft would still have been the only viable option for companies like Samsung, Sony, HTC, etc and Windows Phone 7 and 8 were fine platforms. They could absolutely have competed with the iPhone just as successfully as Android did. They were just too late because Android was already out there and already had the apps.