I don't think I've ever spent any time converting FLAC to AAC (which is what I use on my portable player - HTC Desire). I buy a CD, put it in the media player, and press OK on the remote control. Some minutes later, the CD pops out again. The media player music storage has a FLAC copy (which it plays just fine), the portable player sync folder has an AAC copy.
I don't see why I couldn't download a FLAC file, and have some service auto-convert it to AAC and put it in the appropriate place. Should be trivial on Windows or Linux.
If you have any DNLA media players, FLAC could be converted on the fly to whatever format they want, including any of the widely supported .lossless formats, like WAV, WMA Lossless, and Apple Lossless, etc.
Whether you think the difference in quality between mp3 & lossless is worth it is a personal choice. If you listen to a lot of classical, or actually know what a cymbal or violin sounds like, you might prefer FLAC. If you only listen to compressed to death pop through $0.50 earbuds on a clipped at 200Hz & 16KHz portable player while standing next to a busy road, then you're probably happy with mp3 :-)
But personal choice is what the article is arguing for - why not actually allow people the choice in music downloads, in an unencumbered music format, that anyone with a PC capable of downloading it can listen to?
(TBH, I expect the answer would be "personal choice in music formats does not make money for the vendor".)