Hundreds of people will eagerly tell you that the iPhone is still better than all comers. Hundreds more will happily extol the many virtues of the HTC-manufactured, Google-marketed Nexus One, the latest in a long series of "iPhone killer" devices. I'm a happy iPhone user, but I'm not so blind that I don't see room for improvement.
Clearly, most of the "smartphones" introduced in the last two years owe more to the iPhone than anything else. The iPhone was proclaimed as "five years ahead of any other mobile phone" when it was introduced, and it still seems to be ahead after three years, but only after several updates, and maybe not for another two years.
I come to praise iPhone, not to bury it. Rather than envision a winner-take-all market, in which iPhone (or its eventual conqueror) is 100% great, and all others are 100% awful, I would like to see iPhone learn some things from Android (or Pre, or whatever), making a great product even better. Similarly, I would like to see Android get better and better, eventually giving iPhone a serious challenge.
When companies compete, customers usually win. When companies grow complacent, nobody wins.
The question is, what should Apple learn from Google and HTC? Never mind the things that iPhone does better already, how does the Nexus One beat iPhone?
Much of the Nexus One's positive attention focuses on non-product issues, like the carrier (<obligatory>AT&T is dreadful</obligatory>), or the business model. Those things may be important to individuals, or in the long run, but at this point I think it's too early to tell how it will all shake out, so I'm going to focus on hardware and software, the things under Apple's direct control.
Voice Control: Dragon Dictation is a voice dictation app for iPhone that works very well, but it isn't integrated with the operating system in the same way as Nexus One's voice dictation. The iPhone has a "Voice Control" mode, but it is limited in what it can do. It works well for voice dialing, and voice control of music, but no more. The Nexus One accepts voice input nearly everywhere! Apple has their own voice recognition technology for Macs that works well, or they could work with or acquire Dragon. Either way, I would like to see an option for universal voice input on iPhone.
Background Processing: No mention of iPhone shortcomings can omit the lack of app multitasking. The inability to run multiple apps at once is not purely a technical limitation, since some apps, produced by Apple, are capable of running in the background. Instead, it's a business decision, dictated by many things, including battery life and complexity. Just as Apple waited for a long time before finally releasing a nice copy/paste implementation, I suspect we may have a long time more to wait before Apple allows third-party apps to run in the background, but I hope they do allow it at some point.
Having seen how poorly copy/paste works on many other smartphones, I understand the reluctance to commit, but as the hardware powering each generation of iPhone gets better, I find myself imagining how background processing might work. Most apps simply don't need to run in the background, ever, and doing so could not possibly cause anything but trouble. But while Peggle has no purpose in the background, Pandora is made for background processing. Facebook may work well enough with Push Notifications, but Skype will only be truly useful when it can continue to run while you switch away to look things up, as AT&T reminds us we can do with normal voice calls.
I'm not sure whether each app should have to justify running in the background before it is available for sale, but I suspect Apple would insist on that level of control, as a protection for their millions of neophyte users who will blame Apple when their battery life drops, never realizing it's the 3-D game they've forgotten they're running doing the battery draining. Whether Apple insists on a flag or not, one thing is certain: any app that wants to continue running in the background will have to prompt to ask the permission of users, as apps that want to use Push Notifications do now. Given that user opt-in, I hope Apple would be generous with which apps it allow to run in the background, and that app developers would be required to handle things gracefully when they're disallowed background processing.
I don't use an iPhone because I want my phone to be as complicated as my desktop, despite the cries of blog commenters insisting that running dozens of apps at once is a basic human right. Apple never loses sight of the users not savvy enough to promote their views on tech websites, but even those people are influenced by the geeks in their lives enough to know that they're missing something when MLB At Bat audio quits every time they check their mail.
Camera Quality: The difference between three megapixels and five megapixels is vanishingly small, especially given that the majority of iPhone photos seem to be sent via SMS or email, which by default resizes them to even lower resolution. The lack of a flash, on the other hand, makes the iPhone useless for many poor lighting solutions. Automatic flash operation would require no app changes, since apps should be relying on Apple APIs for photo acquisition, but manual flash operation would require tweaks to apps like Camera Genius. Worthwhile, I think, and might as well raise the megapixel count while they're at it. Most people won't notice.
Touch Accuracy: While the iPhone demonstrates far superior accuracy overall, confirmed anecdotally in my own use of both phones, the iPhone's performance at the edges is a problem. I knew the problem existed, but these results demonstrate that HTC has managed to deliver the same level of performance edge-to-edge. Apple should be able to do the same.
What else? There are a few things that might make the list for others, but not mine.
Removable Battery? Between Apple's arguments for using sealed batteries and a growing market in third-party battery extenders, I don't see this as necessary, though I once did. Also, no embarrassments!
Turn-by-Turn Directions are free from Google for Nexus One, while various third parties from AT&T to Tom-Tom charge extra for the same features for iPhone. I suspect Google will want Apple to add turn-by-turn directions to their Maps app, but if Apple doesn't, for fear of competing against Tom-Tom and others, I suspect Google will release their own app for free. Either way, no change seems necessary.
Higher Resolution is probably coming, since Apple has demanded from the beginning that developers keep things resolution independent. I suspect that, in practice, many developers will have some work to do once the first non-320×480 device is released. I also suspect that most users won't notice any change at all unless the physical screen size also changes.
With those items, my list is done! There are other differences between the phones, but it's difficult to come up with more changes I would like to see in the iPhone in response to the Nexus One. With so few changes need to come up to par with Nexus One, and so many areas in which iPhone is already ahead of Nexus One, Apple is left with quite a bit of time to continue to innovate, making the future of smartphones look bright!