Because the name is "Android Open Source Project".
It's totally fine to develop closed source software! The problem is that if you market something that's actually closed as "open", you're being disingenuous.
Apple did the same thing with Darwin, but to their credit they started backing off on the "open source" marketing once it became clear that they were heading in that direction.
The Darwin source is still being released if you want it (following the periodic code dump model), it just doesn't get much attention. For most people, it doesn't really offer a compelling case over Linux or its *BSD cousins.
It's totally fine to develop closed source software! The problem is that if you market something that's actually closed as "open", you're being disingenuous.
Apple did the same thing with Darwin, but to their credit they started backing off on the "open source" marketing once it became clear that they were heading in that direction.