Because it takes significant financial effort to push forward a complete smartphone OS with a set of basic apps.
Do you know OpenMoko (http://wiki.openmoko.org/wiki/Main_Page)? They were (are?) working on the same goal as Android, just more open and less subsidized. For years they struggled to create an OS which would allow dialing a phone number without invoking a terminal emulator.
What about Moblin/Maemo/Meego? Another Open Source attempt at Smartphones that failed due to inconsistent/missing support from its main financial contributors (Nokia and Intel).
Of course the whole thing is about standing on the shoulders of giants, and all these projects profited immensely from the availability of the Linux kernel, GCC and other large OSS projects. However, all these projects do exist for a long time already, and as the other examples should indicate, it is all but easy to create a SmartPhone experience from them.
With all that said, I do not it like very much either that Android is so closely-coupled to Google. However, they made the breakthrough now and it does not look like there is any "real" OSS competitor left.