Except people don't actually buy in a way that's consistent with enlightened self interest, making the free market at best a poor approximation to reality.
Consumers buy what's advertised, what's 'influenced', what their friends have and what's shiny, ahead of what might actually be useful for them. Micro-level decisions people make rarely take into account macro-level consequences.
This is not to say I think regulation is an amazing solution to everything, but more that I think there is a religiosity to free-market proponents that credits market participants and markets themselves with more than their due.
The free market is a myth. We have a smartphone OS duopoly, and neither one needs to provide what customers actually want in order to be successful.
A new company entering this market will have essentally no chance of being successful.
We don't have a healthy, competitive market here. If I want to buy a new couch, I have hundreds of manufacturers to choose from, with a wide variety of styles and colors. I can pretty much find my perfect couch, given enough research. And if for some reason I can't, I can hire someone to make me a fully custom couch.
Obviously furniture and phone OSes are not the same thing, and it isn't feasible to expect there would be a market for hundreds of different phone OSes. But the principle is the same.