The reason why WiFi has poor performance in dense environments is because there is no central coordinator for spectrum usage. Stations pick a random frequency and start talking. If another station is talking when you want to send a message, your station will wait indefinitely for the channel to be free. The result is that you get random latency spikes; your VoIP call just gets dropped, you get disconnected from your online game, your video call freezes up. There is no concept of determining what's best for everyone; anyone sending a message checks if the channel is clear and goes about their business.

This all sounds somewhat fair, but the problems really start when not all the stations can hear each other. Station A can hear Station B and Station C. Station C starts sending a message to station A. Station B can't hear Station C, so starts sending a message to station A. The result is that both messages are lost and the effective channel capacity goes to zero. This is obviously a big problem.

The fundamental problem is that radio is very much half-duplex. Only one station can use a certain amount of spectrum at a time; if someone is using it, you can't. It causes problems everywhere; with WiFi, with air traffic control, etc.

Centralized frequency allocations get around this with better protocols. All the stations know about each other, and can be told when they can transmit by a centralized coordinator (TDMA is an example of such a protocol). As a result, each station has a predictable amount of airtime, and therefore guaranteed bandwidth and latency; no time is wasted with two stations talking over each other. (There are other sharing schemes that are more interesting and popular than naive time-sharing; CDMA, spread-spectrum, and GPS's "Gold Codes" are all interesting reading.)

The easiest way to implement this is not to write a standard and then ensure that everyone buys a standards-compliant device, but rather to give chunks of spectrum to companies, and have companies distribute devices that work they way they want. It's easier for the regulatory agency ("pay us money and do whatever you want"), and doesn't cap innovation. Verizon can collect your phone tomorrow and give you a new one if they want to use whizbang new technology. I don't think that's a bad thing, but it is of course a compromise. (Faster innovation, less government interference with technology... but at the cost of making it impossible to start a cell phone provider on your own.)

I guess my TL;DR is: it's not that simple. You could let everyone do whatever they wanted. That's how it was in the early days. People used spark-gap transmitters that generated so much noise that there was effectively only one half-duplex channel for the entire planet to use. Regulators saw that that wasn't going to scale and invented spectrum allocations, and here we are today. It's not perfect, but technology is improving how we used the unlicensed bands. (I am not as up to date as I want to be on WiFi specifically, but if you look at the amateur radio community, it's routine these days to communicate around the world with 5-10W of power. 20 years ago, it would have taken two orders of magnitude more power and 20x the bandwidth to do with voice what we do with FT8 today. People are still idiots, though, and generate plenty of QRM. It only gets worse when people without licenses start operating the radio stations.)