Politicians are greedy, and want to have control on everything. Including economy and research. And AFAIK, even more so in Israel, because of the military background of prominent state officials.
Respectfully, it's clear you don't really know anything about Israeli exact science academia and high-tech industry, both of which rely very little on government money; most of their funding comes from international competitive research funds and international investors, respectively.
If anything, Israel's army is a driving force for innovation.
Bottom line: your thesis about Israel is nice. It's just unrelated to reality.
I'm sure it has nothing to do with the billions of dollars that pour in to Israel each year as welfare from the U.S.
You are right. The 3$ billions per year Israel receives from the U.S. is ~1% of Israel's yearly budget. Importantly, most of the U.S. aid comes in the form of military equipment (that is, the actual funds flow directly to the pockets of U.S. military industry). It has nothing to do with start-ups and CS departments.
For a military state such as Israel, it is impressive that every now and then they come up with innovations; not very many, but they do come up with them.
I suggest you take a look at, e.g, http://en.wikipedia.org/wiki/Start-up_Nation. Here's one paragraph (the source is backed by reference):
"How is it that Israel -- a country of 7.1 million people, only sixty years old, surrounded by enemies, in a constant state of war since its founding, with no natural resources -- produces more start-up companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada, and the United Kingdom? The Economist notes that Israel now has more high-tech start-ups and a larger venture capital industry per capita than any other country in the world."
Or, e.g., browse the list that ranks the top-100 computer science departments in the world and observe where and how many times the Israeli flag appears in the list. (FYI, Israel has only 6 universities.)
Yes. Rules like this probably reflect the difficulty of the issue. And when Microsoft was under scrutiny in the US, they claimed that the "browser is an integral part of the operating system". I.e. they put technical reasons forward.
Except there was a bit of wool-pulling there: the html rendering and http components may have been integral to the OS, but removing the IE "front end" - which is what competes with Firefox, Opera et. al. - is a cinch.
But the decision is artificially constrained by the exclusivity of the deal. It's anti-competitive.
...but that's not a problem with OEM bundling per se. PCs have come with bundled operating systems since the year dot. If a particular OS producer says to PC manufacturers "we won't license our OS to you at a competitive price if you also offer bare PCs or competing OSs" then you're back to antitrust law. (IANAL but I'm pretty sure that's never been legal - the problem is getting it enforced!)
If they ever achieve monopoly, I bet we will see them arguing "MacOS is an integral part of the Apple computer".
Well, it is: Windows minus IE is still Windows; a Mac minus Mac OS is just a generic PC in a designer case.
However, if Apple wanted a Mac monopoly they'd probably have to unbundle somewhere along the line anyway in order to offer a comprehensive range of hardware choices: their current bundling strategy makes perfect sense for a niche premium-priced laptop, SFF & workstation market. Currently, they seem happy there.
There are still major restrictions such as the AppStore.
The AppStore may be restrictive, but its also bootstrapped a largely new arm of the software industry. Its certainly not very Free As In Speech but it seems to have given a lot of small developers easy access to a huge market. Anyway - I see the App store as a temporary measure while mobile internet connections evolve: once you have dependable, always on mobile internet, browser-based "cloud" applications make so much more sense. Currently, if I want to run my own software on an iPhone, the best bet is to write it in AJAX and host it on my home server (which probably means it will work on Android, Palm, Nokia...).
My solution is to use free software (i.e. GNU/Linux, Amarok, Okular, Gwenview,
Until the EU demands that linux distros have a choice screen... "Do you want VIM or EMACS?", "Do you want to use LaTeX, DocBook, nroff...", "OpenOffice or KOffice or ABiword", "Amarok or Rhythmbox", "PHP, Perl or Python..."
(Yes, that's silly for all sorts of reasons, but be careful what you wish for because the EU and the DOJ are not particularly strong on common sense...)
If it's worth hacking on well, it's worth hacking on for money.