The alternative is you have files with character-identical names that the filesystem considers different. Historically this leads to wacky security holes, files that some programs can't access (what's *your* UI for typing a precomposed vs. decomposed o-with-umlaut?), stupid stuff like that.
I don't *like* either alternative much, but I doubt you're going to get everyone to switch back to ASCII, either. The problem isn't going away.
So... we can whine about how unfair it is that character systems are complicated and ignore the problem, or we can hold our noses and pick a least-bad option. The latter is probably more productive (though inertia suggests the former is most likely).