ETA: It's over and Google has fucked it. Details from Cyanogen are on his Twitter feed: http://twitter.com/cyanogen or Google's mealy-mouthed blog post: http://android-developers.blogspot.com/2009/09/note-on-google-apps-for-android.html. Also worth noting: the new Market application that seems to have provoked this stupidity is pretty nice, much better than the previous one. xda-developers are furious that CM was singled out.
Android is for Google a way to encourage mobile phone carriers and mobile phone manufacturers to ship Google applications and use Google services on their phones and networks. Google needs this because the vast majority of their income is from ad-based services and they have to keep traffic growing to keep revenue growing. The incentive is that Google licenses them the entire software stack for their devices at no monetary cost, drastically cutting down on what it would cost the carrier or device manufacturer to develop new products. To get this "free" software they have to agree to Google's distribution licenses for the software and to use the Market software store and play by its rules. Almost everything in this software bundle is open source available freely from Google except for the key Google Applications that the whole thing centers on: GMail, GTalk, Google Maps, and most importantly the Market application itself including it's revenue sharing for commercial application sales through it. This is the primary way applications are installed by users and a source of revenue for Google and the phone companies.
If these key apps were free software, or even downloadable for free without a restrictive license then Google loses the lever that it created to make sure the carriers and manufacturers support their business and risks their entire investment in the Android platform (easily millions of dollars). If anyone can just download the application package (apk) for GMail and throw it into their device image file and set their own home page rather than Google's ... the whole thing may no longer be worth doing for Google.
On the other hand, Google would seem to benefit from more users and a larger installed base and having more people looking at ads and using their services. Keeping their ratings up. Having multiple companies and organizations redistributing those applications outside of the big licenses with the phone carriers and manufacturers seemed okay, particularly on a small scale. This was the status quo through most of the life of the platform (almost a year now).
Meanwhile, third-party (non-Google) developers have flocked to the platform and a few have even been doing releases that use open code (from Google and other developers) to push the platform forward. These releases really unlock the potential of the devices, making them run faster and smoother and providing tons of user requested features that Google didn't have time or interest to write. This didn't bother Google or the carrier noticably and made it much easier for us to mock IPhone/ATT customers-- I mean use our phone to their potential. The newer software is released in the same form as Google's releases and update packages using their tools (or improvements on them). And just like the available downloads from Google pretty much all of them include the key Google applications at issue ... especially the Market application itself.
So, Google has been distributed these packages (and likely still is). One can't use them or redistribute them without Google's license (permission) but this typically only effects the big companies who have existing business relationships with Google (or want some). Of course all of the outside developers and some of the carriers have done so over the past year. Not many wanted to upgrade their "Google Phone" and not have Youtube or GMaps after all. In fact one of the first big waves of these upgrades was users upgrading their phones to the new 1.5 release themselves rather than waiting for the carrier to update the phone over the air. Such OTA updates are distributed semi-randomly and so some new purchasers were having to wait us much as two weeks to get the software update from T-Mobile before they could install their applications. The third party images solve this and many other problems. They actually have nice update applications you can download and use yourself.
This week, Google lawyers have sent a letter to the largest of these system developers demanding he immediately stop redistributing these tightly licensed applications. They are in talks now. (I really think there must be better ways to start a conversation). Of course he ( or the next guy if he quits the hobby after the lawyer attack) will start issuing images without any of these applications ... it's only fair and hey, attack lawyers.
Two weeks after that, the modding community will have its own application distribution system, its own application to replace the Market for software distribution, and Android will be in mostly the same dark slimy place as Apple's iPhone where users have to go around countless legal and technical hurdles to actually use their devices as intended. I won't have the GMail, Market, GMaps applications anymore and may give up on the dozen or so Market applications I have installed and use occasionally. Is this how it has to be? Dos anyone really want this (other than Apple)? No.
I think Google should use some of their resources to solve this problem and quickly. By finding a good solution to this problem they can mitigate the immediate PR damage and still maintain their company ethic and position v. Apple and others in the mobile software market. My proposal is that they throw an "emergency developers convention". Get as many of the top third-party developers together with some of Google's lawyers and engineers, and some lawyers and engineers from the carriers and device manufacturers all together in one place (at worst in one online place) and just work it out. Find a way to keep the platform moving forward and functional without forking or reducing the value of Android to anyone.
Meanwhile I just used the CM Updater to grab the latest experimental release of CM 220.127.116.11 for my G1 and hope it's not the last one he'll make. If you've read this far, go buy C a beer or toss some coppers into his legal defense fund (more beer).
Your comments are appreciated. In particular this piece is too long but I am unsure that it can be accurate and be much shorter. Thanks for reading!