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One can make a free, non patent-encumbered implementation of Flash player, and the specifications can be nowadays freely be used to do that. So the de-facto implementation is not open, but it's not restricted like H.264.
But clearly it's a step forwards again, a forced one. And from business perspective and keeping their existing business model they are doing just the right thing, giving up only when it's absolutely necessary, while keeping their public picture as shiny as possible. I just think we are far from getting to the point that the old proprietary software houses wouldn't try to take away the freedoms of the free software by any means possible. If only the US would lead the way with evaporating software patents...
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What has been stalled is the development of the successor of FreeRunner, formerly known as GTA03. It will not ship in 2009.
Anyway, I hope they will stay in business as they are still the only one doing a phone that is really usable as a phone with eg. Debian or whatever. It would be perfectly fine if they now scrapped _all_ their non-hw & non-kernel efforts. They are lousy at handling a software community or coding UI anyway.
As can be guessed, I'm a happy user of FreeRunner as my only daily phone, and it would be sad if one day I would be forced to use a less free phone. And yes, Android dev phone is quite far from Openmoko in reality... it's not like buying a new computer and installing a distro of your choice on it like it is with Neo.
This is where the Neo FreeRunner shines - not only you can install Debian (or Gentoo) on the device, but you can actually use it as your daily phone / GPS device / music player to a similar extent you can use the Openmoko distribution.
It's not just, or it should not just be a "fun hack" to install Debian on your phone - the point should be that you can use your phone with Debian, similar to what you done on your desktop/laptop computer. Of course, there should not be any need to hack the phone before being able to install own programs on it, but there is already the Android dev phone available so that's not the problem with Google phones.
Nokia Internet Tablet and Openmoko Neo FreeRunner owners might be interested in Numpty Physics: http://numptyphysics.garage.maemo.org/ & http://www.cs.helsinki.fi/u/rantalai/freerunner/numptyphysics/
From the Press Release: "X11R7.2 [...] incorporates significant stability and correctness fixes, including improved autoconfiguration heuristics, enhanced support for GL-based compositing managers such as Compiz and Beryl, and improved support for PCI systems with multiple domains. It also incorporates the new, more extensible XACE security policy framework.""