One of the presenters at the recent C4 Mac developers conference made a point about Apple that is incredibly relevant to how the company is viewed, especially by the media and rabid Apple fans. To paraphrase his statement, in dealing with Apple, one should never assume that the company is being malicious when its behavior can be just as easily explained by incompetence.

These days, there are a lot of iPhone developers—and users—who are suddenly rooting for incompetence. Because when it comes to the entire machinery of the App Store, something is terribly wrong. It’s not something you may even notice today if you’re an average iPhone user. But in the end, if things don’t change, what’s happening right now may seriously weaken the iPhone as a platform and enable Apple’s competitors to get the upper hand when it comes to dominating the smartphone market.

To say that those responsible for the administration of the App Store are actually incompetent is pure hyperbole. Setting up the App Store has been a gargantuan task. I know people enjoy assuming that complicated tasks are actually quite simple, but let’s be real here. In a very short period of time, Apple had to roll out a complete third-party development environment for programmers (while still trying to get all the screws tightened on the iPhone 2.0 software—and look how well that turned out). It had to set up a new infrastructure for selling software via iTunes and get all the legal documents and payment methods worked out. And for some very good reasons, Apple created an application-approval process.

That’s a lot of stuff in a very short period of time. This year has been a tough one for Apple, and in many different venues we’ve seen the company struggle with its success and its rapid growth. Apple can only do so much, and with the App Store and iPhone development, it may have bit off more than it could chew. But what was it to do? Macworld was certainly at the head of the line of pundits and developers who were banging their drums, demanding that Apple open the iPhone up to third-party development as soon as possible. Apple certainly felt that pressure—as well as the opportunity to really transform the iPhone and iPod touch through a third-party development system.

But now that Apple has opened up the iPhone, we’ve got a situation that’s full of chaos and confusion and hurt feelings. And it’s time for Apple to explain what it’s doing.

What’s happened

If you haven’t been following the soap opera, let me give you a recap. Apple has always said there would be limitations to what it would allow in the App Store. Steve Jobs’ slide during his roll-out of the App Store included the following traits that would prevent a program from appearing on the App Store: “Porn, privacy, bandwidth hog, unforeseen, malicious, illegal.”

Here’s what Jobs said: “Now, will there be limitations? Of course! There are gonna be some apps that we’re not going to distribute. Porn, malicious apps, apps that invade your privacy. So there are gonna be some apps that we’re gonna say no to, but again, we have exactly the same interest as the vast majority of our developers, which is to get a ton of apps out there for the iPhone.”

The first issue with Apple’s filtering process is that it has frustrated developers by causing delays in getting apps up on the App Store. Developers can wait weeks after submitting a finished product or update before it’s rolled out to customers.

The second, and much larger issue, has to do with Apple not being clear on its policies about accepting and rejecting applications. In fact, saying Apple’s policies are unclear is quite an understatement. They’ve been confusing, arbitrary—and cloaked in mystery due to Apple’s blanket iPhone non-disclosure agreement (as my colleague Dan Moren writes about today).

Apple accepted (then later rejected) NetShare, an application that shares your iPhone’s digital cellular connection with your Mac. That use violates AT&T’s terms of use, so removing the NetShare from the App Store made some sense. (There’s an entire conversation I could have about how AT&T is stupid not to offer connection-sharing a la NetShare as an add-on to the standard iPhone contract, but we’ll save it for another day.)

Apple also killed off an app called I Am Rich that did nothing but cost $1000. This points out the importance of the App Store having a solid return policy, if nothing else.

But then things got weird. Apple rejected an app that shows a butcher knife and makes a shocking noise. And an app that makes fart noises. And a comic book with some graphic content. Some developers reported having their applications rejected for not following Apple’s interface guidelines.

And then things got downright ridiculous. Apple rejected the application Podcaster, because it duplicated “the functionality of the Podcast section of iTunes.” Funny, I don’t see that in Apple’s list of items that would bar a program from the store. In fact, one of the biggest limitations of the iPod app on the iPhone is its inability to update podcasts without connecting to a computer. The Podcaster app was improving on Apple’s lackluster implementation of its own technology, and got kicked out of the store because of it.

Next up: MailWrangler, a simple app that lets you view your Google Mail from multiple accounts. It was rejected for duplicating Apple functionality “without providing differentiation or added functionality, which will lead to user confusion.” Horrors! But I didn’t see “user confusion” on that slide at the App Store announcement event.

Why this is terrible

I’d like to believe that these things are happening because Apple’s still trying to get its act together, and not because it’s decided to exert Soviet-style control over the App Store, blocking out all potential competition. But here’s the thing: Even if that’s true, developers are getting fed up. (To hear from a developer about this very topic, check out our latest Macworld Podcast, featuring Rogue Amoeba’s Paul Kafasis.)

Now you, as a user, may say something along these lines: Why does it matter to me? Maybe these developers are a bunch of spoiled brats, and they should just shut up and keep making money hand over fist from the App Store like those guys who wrote Trism.

If you don’t want to sympathize with developers, let me rephrase it to describe how this will affect users: If developers are afraid to write programs for the iPhone that aren’t games, to-do lists, and tip calculators, for fear that all their hard work will be wasted by a malicious or capricious Apple rejection notice, they will stop writing programs for the platform. And the well of innovative, interesting iPhone software will dry up.

But that’s not all. Some of them will turn to more open platforms, such as Google’s Android, and start taking their good ideas there. Which could transform phones running Android into full-featured devices that simply do more cool stuff than the iPhone, no matter how hard Apple tries to write its own software to catch up. Which could, in time, lead to the iPhone becoming a marginalized and limited product, all of its potential exhausted by the idiocy of Apple’s tight-fisted control of the App Store.

Yes, friends, I do think it’s that serious. If what we’re seeing now is Apple policy—in other words, maliciousness instead of incompetence—it risks the entire future of the iPhone platform.

What Apple must do

Let’s not kid ourselves: There are plenty of people in Apple who know exactly what Apple needs to do to fix this. The only question is, are they the ones in charge? If they are, then Apple’s probably just waiting for the right time to announce that it’s all been a big misunderstanding and now everything’s hunky-dory.

But just for the record—and just in case Apple’s behavior really is malicious rather than incompetent—let’s go over what needs to be done. (And before I start my list, let me recommend that you read the essay on this topic by Wil Shipley of Delicious Monster if you haven’t already, because Wil’s got it right.)

First and foremost, Apple needs to come out with crystal-clear guidelines for the App Store. If a developer invests tens or hundreds of thousands of dollars in app development, they need to know that their app won’t be rejected. Even if the guidelines are brutal and draconian, if they’re clear and enforced consistently, nobody will be left holding the bag like the developer of Podcaster.

But let’s go beyond that. As Shipley writes, the right way to handle the App Store is to make it a free market. (This is the approach Google is taking with Android, by the way.) As Shipley writes: “Publish all software submitted to Apple, as long as the software isn’t actively harmful to users, illegal, and does not violate Apple’s agreements with cell phone vendors. Period.”

Apple needs to protect iPhone users from illegal and malicious software, absolutely. But beyond that? It should not be Apple’s job—nor is it in the company’s best interests—to be an arbiter of taste. (If Apple is concerned about children and the easily offended, might I suggest a voluntary ratings system for all apps, so developers can warn off such users? iTunes already has content warnings built into it for other media types and even some apps.)

In other words, if someone wants to write a fart-generation app, let them. If someone wants to write a butt-ugly e-mail client that only connects to Yahoo Mail, let them. Let the users (and, here’s an idea, those of us who write software reviews) sort the wheat from the chaff. Good ideas will flourish. Bad ideas will, too, if they’re popular enough, and that’s okay.

But the bottom line is this: as long as developers have no reasonable expectation about what will happen when they submit software for App Store review, the platform will suffer. Developers will get frustrated and shift development resources elsewhere. And most importantly, it doesn’t have to be this way.

Or as long-time Mac developer Brent Simmons put it the other day: “Someone is making a mistake. This behavior is definitely beneath the company that makes the software and hardware I adore and love developing for.”

As always, the ball is in Apple’s court. For the sake of the iPhone’s massive potential, here’s hoping that Apple does the right thing, and soon.