Obviously, Apple did something (likely marketing, imho, and of course extreme ease of use) right to make the iPhone as popular as it is, but I would need to be convinced that it had something to do with functionality.
The version of IE was unusable for most of the web. But you don’t think “extreme ease of use” made the iPhone more functional?
The devices we use to deploy were $1000-$2000 (ruggedized devices) so they definitely weren’t cheap devices for the time.
IE eventually got pretty useless, but unlike iPhone you could always load alternative browsers, shells, and what not.
Sorry, I am still seeing that yes, iPhone is easier to use, as long as you don't need to do much, but functional? Not back then. And whether capacitive or resistive screen is better is a big question -- at least resistive is far more precise.