Phone makers were afraid of copyleft for various reasons, mostly irrational. Also, copyleft probably wouldn't help Google's goal of getting as many Android devices in the market as possible.

A viral license actually could have been a much more effective carrot/stick tool for Google vs. their current situation (early source access, carrier contracts, etc.). Play ball with us (Market, etc.), and we'll give you a full closed-source license. Otherwise, we expect to see full source of your modifications made available per the GPL.