What the iPhone did was genius: they created demand for the phone, but would only sell through phone companies willing to let Apple control the app market. That made all the difference: all of sudden, a developer could make an app and have it show up to bazillions of people.
[disclaimer: I currently work for Microsoft, but not in the phone team. But I do have apps in the Microsoft app store!]
There were many companies living on this stuff. Mobile data was still very expensive, which didn't change for a few more years, and touchscreens were small and crappy. So the market was mostly business logic and CRM apps because they were the ones that could afford it.
That changed when mobile data and big screens became cheap enough for consumers, but I think Apple was as confused about that as everyone else given the state of early iPhones.
I would have to disagree with that statement. Windows Mobile and BlackBerry allowed 3rd party apps to be installed, but they were both difficult to find and didn't usually add anything beneficial to the phones at the time. Users, for the most part, stuck to what was installed on the phone and that was it. Smartphones were defined by the fact they had an email client and a (relative to the time) high-resolution screen to read and write emails on.
It was a different market in 2007. The idea that a successful smartphone required an app ecosystem was unheard of.