It sounds like there's plenty of demand for the iPhone, but that the problem is the low demand for the AT&T network. There are plenty of substitutes for different networks, but not as many for an iPhone. Maybe Apple could come up with a different strategy that didn't depend so heavily on one network.
Apple reported that they have sold 3.7 million iPhones, but the mystery is that AT&T, the sole wireless provider for iPhones, has only reported 2 million iPhones activated. Where have the other 1.7 million gone? Industry insiders suspect that the iPhones are being “unlocked” to run on non-approved networks. Apple receives $10 a month for every iPhone on the AT&T network, so they are missing out on a lot of revenue from the “unlocked” phones.