This would just reassert the point that Google's TS are discriminatory, since they don't abide by them themselves, and the end result is that they can pick and choose which platforms get a full-fledged YouTube experience and which don't.
I don't see a problem with Google treating themselves differently to people who want to use their API. It would be entirely reasonable for them to have YouTube and offer no API at all.
Amongst other reasons - Google have the ability to update their own apps if they feel a need to change things in the future; They have less control over third parties, so they have a legitimate reason to care more about how third parties implement critical functionality like displaying adverts.
Yes, they pick and choose which platforms get full-fledged YouTube, just like the way Microsoft pick and choose which platforms get full-fledged Office. I don't have a problem with that either.
Can you give an example of a specific HTML5 feature in IE that YouTube would require? It supports a great deal of the standard as of IE10, you know.
In an official statement YouTube said:
"We're committed to providing users and creators with a great and consistent YouTube experience across devices, and we've been working with Microsoft to build a fully featured YouTube for Windows Phone app, based on HTML5. Unfortunately, Microsoft has not made the browser upgrades necessary to enable a fully-featured YouTube experience, and has instead re-released a YouTube app that violates our Terms of Service."
If you mean basically hosting the mobile YouTube page as is in a web browser control and calling that an app, then this is precisely what several dozen YouTube players for Windows Phone already do.
One sticking point seems to be their ad-serving code. Presumably, this is exactly how Google want it implemented (in a browser control).
The problem with this approach is that it plainly sucks, which makes the users annoyed. Google was asked to write an official app for WP, but refused, citing low market share. Hence the attempt by MS to fix this themselves.
So MS signed up to the google API terms and conditions, then thought they could break them.
I don't see what the controversy is here, Google doesn't want to release a windows phone app - they don't have to. I released one for one of my apps, and frankly it was a waste of my effort - the platform is insignificant (~3% smartphone sales).
If MS want to release an app, then they have to use the API and follow the terms like anyone else unless Google gives them special dispensation.