It functions as such. Developers make a product, they convince Apple to stock that product, and Apple takes a cut when they sell it. You can argue that it shouldn't be like that, but you can't really argue that it ISN'T like that.

The only thing you can really argue is that they should allow other app stores to exist that aren't under their control. And frankly, they do exist on jailbroken phones and if you want that you can jailbreak your phone, or get an Android.