Should be self-obvious, but I'll explain as I have sooo many times here:

Nokia decided to focus on direct to retail since carriers had been afraid of full-featured cell phones, particularly smartphones. It was a gamble on consumers wising up and seeing that an open market based on unlocked, feature-rich phones was to their benefit. As Nokia lost shelf space with carriers, competitors like Motorola, LG, Samsung et al in their short-sightedness eagerly rushed in to gain that space. Consumers jumped on the "free" phones, largely choosing not to actually educate themselves on the reality.

Had Nokia's competitors thought more longterm, they would have joined with Nokia and begun chipping away en masse at the locked US market. Then again, that would have ultimately meant real competition.

Instead, they were sheep.

Oh, and I hope you don't think I'm misunderstanding the regulation aspect.