Consumer choice is Good.
The picture you paint is one of:
"Apple cannot complete without excessive control of their platforms".
People would like to be able to play drm'ed AAC files on other devices, such as cell phones, or other MP3 players etc. At the moment the consumer does not have the choice - and 'you can rip to CD and back again' isn't an answer, its cumbersome and time consuming - something the user should NOT have to do.
Nokia have gone with microsoft DRM. The #1 Cell phone company in the world. This could have been Apple if it was willing to license.
Apple would sell vastly more AppleTVs if it wasn't tied 100% iTunes and own formats, i.e., the ability to play DivX. At the moment the AppleTV is only good for u.s customers because there isn't a lot of content in other countries - no TV content for example.
If Apple cannot compete without excessive control, may it doesn't deserve to exist?
As I keep saying - more Consumer choice is a Good Thing, not bad.
The backlash against Fairplay and iPods is just beginning and I'm guessing this is why Apple is starting to think about licensing out Fairplay. If Apple doesn't license Fairplay, it will, sooner or later, be forced to.
Americans are supposed to hate communism ( well, most don't know the difference between that and socialism, but anyway... ) Apple would be the equalivant of a communist company - will tell you want formats to use, and what devices you can use ( i.e., Fairplay, iPod, iTunes ), or what software you can use ( i.e, iPhone )
It is now very obvious through all your postings that you want to see Apple make cheap devices, have its quality fall and allow everyone to pirate its software-- and see them fail. But why?? You have lots of Dell shares???
Every scenario you paint makes it great for the consumer on the first day and for the next few weeks (maybe)-- then Apple fails because all the things you suggest rips away its profits and the company fails. How can THAT be good for the consumer in the long run? The clones proved that!!! Apple is in no position at this time to go "cheap" or give away services and share its technologies for free. That is pre-Wall thinking.