The iPhone came out just as WiFi had become pretty ubiquitous and a reasonable data plan was something that could be negotiated. And, even so, you could argue that the iPhone didn't really take off for a few more years.
(The iPod before it had a somewhat similar trajectory. It wasn't obviously a game-changing device from day one.)
ADDED: Connectivity was an issue with the iPod too. It didn't matter that much for music. But anything that required timely updates, such as podcasts, didn't work as well.
Apple changed that. They negotiated a special contract with AT&T and for a year or so the first iPhone was the only phone in the US with unlimited data plan.
https://www.sprint.com/business/program/newsletter/march05/p...
Apple heavily marketed capacitive screens as an asset, so people who haven't every used a quality resistive screen still carry that around internally.