As much as I love my DS, competition is always a good thing.
It's debatable, but some say the DS and Wii aren't even in the same market segment as the rest of the consoles. Nintendo's playing a totally different game with their products, and they don't really have much competition for what they're offering. Really, when was the last time you considered Nintendo's current lineup a contender for the "serious gaming" crowd?
If the DS was the only handheld left on the market, quality wouldn't decrease for anything. Nintendo would still be building a great product and developers would simply be competing on a single platform instead of having a hodge-podge of choices. Nobody complained back when the Game Boy was a loner.