Windows Phone has over 70000 applications, which seems like enough - the problem, however, is not quantity, but quality, and having the applications people want. Microsoft, Google, and Apple often boast about how many applications they have, but we all know virtually all but a very small group are absolute crap. It's those top, say, 1000-2000 applications that matter. The rest is just there for marketing purposes.
And this is exactly where Windows Phone 7 falls on its face, according to Microsoft, and as such, the company has formulated an internal plan to address this issue. First, the company is setting aside $10 million to 'ring-fence' companies like Pandora and Instagram who currently aren't building WP7 applications. Ring-fencing means promoting competitors to these services. Second, Microsoft wants to promote quality over quantity, especially compared to Android. Third, and perhaps most controversially, they want to tie exclusive applications to specific devices.
I'm not entirely sure this will actually solve the issue. Developers aren't warming up to Windows Phone 7 because the returns are simply way too low, especially compared to Android and iOS. Nobody buys Windows Phone devices, so there are no people to buy applications. A bit oversimplified, perhaps, but not far from the truth.
I think Microsoft's saving grace will come not from this plan, but from the future. Windows Phone currently lacks support for native code, which the next release will supposedly bring. The next release will also be tied more closely to Windows on the desktop, which greatly expands the potential market for developers. Every regular PC will ship with Windows 8 come late 2012, and if Windows 8 application code can easily be made to run on Windows Phone, developers will be more enthusiastic about it.
Windows Phone 7.5 still has a long way to in more ways than just the application thing, but as is common for Microsoft, the company's in it for the long run. They've got enough money to throw at it, in any case.