Right now, I'm trying to figure out who this competitor could have been who convinced WotC to make the GSL so restrictive.
Adding to what MerricB said - I'm not at all surprised that WotC tried to move away from the OGL.If you look at the history of 3E and the OGL, you'll find a number of d20/OGL-based products that were very well received that basically took their design precepts straight from D&D
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I have little doubt that people like Ryan Dancey see this as a great success on the part of the OGL. For other people, it's a failure: the OGL is there to allow other companies to make less successful products (i.e. Adventures) and not compete with Wizards directly!
Ryan Dancey's original conception, as I remember it, was that the OGL, operating in combination with network externalities, would generate momentum towards d20 as a common ruleset. That idea seems to have worked out to an extent, although perhaps not to the extent the Dancey anticipated. I think that Dancey may have underestimated the interest that RPGers have in the different play experiences that different mechanics produce, which aren't always easily obtained using d20 (a more-or-less simulationist mechanic by default).
But from the point of view of WotC as a business, Dancy must also have imagined that increased momentum for d20 would support if not increase sales of D&D core rulebooks. I can only assume that this didn't work out, because if it did then the business case for 4e would not have been made out (assuming that WotC has even somewhat rational internal processes).
So when 4e was released, one has to assume that the business prospects, for WotC, of sticking with 3.5 weren't that rosy. So from WotC's point of view 4e may well have been rational, even if not as successful as they anticipated.
What Paizo's rise does tend to suggest is that, if WotC had abandoned the whole 3.5/4e model of rulebooks and the odd setting book and instead gone into adventure publishing in a wholesale way, they might have found an alternative way to move forward. But I can think of at least two reasons why WotC didn't take this route: (i) they seem to lack the capacity to produce compelling adventures (not that I know Paizo's adventures, but a lot of people seem to like them); (ii) they would still have been stuck with the OGL - and thus the potential for being crowded out of the d20 market - hanging over their head like Damocles' sword.