In its filing with the Copyright Office a few days ago, Apple argued that restricting the iPhone to run only software from the iTunes App Store is great for application creators. Apparently, they didn't mean the creators of South Park, whose app has been rejected multiple times:

We first announced our iPhone App back in October, after we submitted the Application to Apple for approval. After a couple of attempts to get the application approved, we are sad to say that our app has been rejected. According to Apple, the content was "potentially offensive." But Apple did admit that the standards would evolve, citing that when iTunes first launched it didn't sell any music with explicit lyrics. At this point, we are sad to say, the app is dead in the water. Sorry, South Park fans.

This is particularly ironic, as episodes of South Park are available through the iTunes Store. And, for that matter, on basic cable.

The South Park app joins a growing list of other applications (many listed in EFF's reply comment to the Copyright Office) that have been barred from the Apple App Store for a variety of stated (or unstated) reasons.

Apple is welcome to exclude applications from its App Store for whatever reasons it likes. But if competition is to work, then customers must have the freedom to choose another store. In other words, the problem here is the technical restrictions that prevent iPhone owners from being able to shop elsewhere. That is precisely why a DMCA exemption is in order, so that iPhone owners can go elsewhere for the applications that Apple refuses to include in its App Store.