This is untrue when you're talking about app development, which this is about. It can be demonstrated by simply pointing out that Microsoft's, Amazon's and Baidu's Android derivatives are fully functioning commercially even though the Google Play Services are not available on these devices. The Amazon App Store even has 240,000+ apps.
There's an increasing amount of propietary Google software running on Android phones, but that has no consequences for other apps. No functionality of AOSP is being absorbed into Play Services at all.
This is not to say that pure AOSP is broken, or that it is impossible to have products like Kindle Fire and Nokia X. But it is a growing problem, and the fact that Amazon has to spend so much time replicating Play Services' APIs to have a decent app store (that is still considerable smaller than Google Play Store) is concerning.
It would be wrong to have AOSP depend on Google cloud APIs, and seperating those cloud APIs in Google Play Services also has problems. There's really no winning here for an open platform.
Google controls the API but Amazon is free to expand the functionality on their devices.
This way, the developer can simply call Context.getSystemService(CLOUD_SERVICE) and have access to whatever cloud service the user as installed.
Every other part of android, from keyboards to cameras, works this way and these services could as well.
Then, having an open source community contributing with open implementations could help filling the gaps to make life easier to those players (and probably lowering the bar to allow new ones to join) and, who knows, to make it possible to have an AOSP device fully compatible with Play Services APIs without the need for gapps, probably just using some private server or other custom solution. Maybe I'm misunderstanding something somewhere, but that seems to be the goal of this project. If it is, then I really hope for its success.
This project and some of Amazon's libraries basically take a subset of Google's Play Services API as canonical and reimplement those. That's not an ideal solution either, but at least it provides minimal pain for app developers.
The cloud service version and the client library code would not be coupled to OS version and updated with APKs just like how Google Play Services does. Its not any harder than exactly what Google is currently doing with play services.
I'm not proposing anything that isn't already being done besides some standardized calls and some extra service discovery.
That's technically correct. But apps that are in AOSP can be supplanted by Google proprietary apps and turn into abandonware.
Goggle has never outright misbehaved w.r.t. AOSP, and in some cases put things like ART into AOSP very early, ahead of commercialization by Google's OEM partners. BUT that doesn't mean that Google Play Services isn't effectively shrinking AOSP's share of the standard complement of apps.