Take the long view through absurdium arguments:

1 - AT&T if it does not have an App Store or a Music Service can then block Apple's App Store and iTunes.  No competing service correct?

2 - I could argue that ALL apps are available via the web and by having a web interface thus AT&T competes with all possible apps today.

Now I recognize that on the face these are ridiculous and are intended to be.  But RBOC lawyers will argue that first argument and if they win they will be rewarded by being able to argue against all apps in the future....unless Apple pays them to get them on the phone. :)

seven

If you go with that logic then you'd have to say all digital communication is competitive to a phone call. I don't think the FCC will interpret net neutrality guidelines that broadly.

It's debateable. In that sense, isn't a text message competitive to voice calls too?

Well, is a voice call a competing service to a video chat app?

It's interesting that AT&T made the distinction between downloadable and preloaded apps. What does that mean for Google Talk, Skype and others? They're downloadable now, but Microsoft will start embedding Skype as a preloaded app on Windows phones. Google could do the same on Android phones. How will carriers respond then?

So long as they don't offer a competing service or app, they can block/restrict/limit any damn thing they want. 

If they do, AT&T needs a more conciliatory attitude. I find it so funny they get so indignant about all these issues. They can make their point without being sarcastic and self-righteous. 

After all they dinged Verizon for breaking open app rules on the 700MHz C-Block.

Sprint's being a little sketchy about it's plans for FaceTime. Spokespeople have implied  to other publications in the past that it would offer it over cellular like any other app, but today a spokeswoman would only say they don't comment on future products or services. I imagine they'll offer it on cellular to avoid backlash like this, but looks like they aren't ready to make a commitment.