Friday, we reported on Almerica Podcaster, a podcast client for the iPhone that Apple banned from the store because it duplicates features offered by the iPhone’s native software. 

We said:

Rejecting an app because it competes with Apple’s own software, though, sends the signal that people shouldn’t develop podcast-related applications for the iPhone.

This is bad for podcast fans, obviously, because they won’t have Almerica’s software available to them. But it’s also bad for the state of podcasting. Almerica or someone else could could have great ideas for mobile podcast software, and you’ll probably never see it because of this.

It’s also bad for iPhone owners, because it means that you’ll probably have fewer options available in other categories of apps that overlap with what Apple offers. Developers don’t want to spend time developing software that Apple is likely to reject.

Ultimately, it’s also bad for the iPhone platform. If developers aren’t clear on what they can and can’t offer through the App Store, they’ll put their resources elsewhere.

Now a lot of others have picked up this story, and it’s even been Slashdotted. 

Podcast pioneer Dave Winer says:

I wouldn’t invest in or develop an iPhone app because Apple could decide not to approve it, and if they don’t approve it you can’t sell it. You can’t even give it away. You don’t find out if you’ve been approved until the last step, after you’ve fully invested, so you could lose, totally, if Apple says no.

Yesterday it came out that they rejected an app called Podcaster because it competed with iTunes, an Apple product. Maybe it was better than iTunes in some way, or simpler, more focused, had features iTunes didn’t have? It doesn’t matter, it illustrates exactly why Apple shouldn’t assume this power, or if they insist on it, you’d have to be crazy to develop iPhone apps.

O’Reilly’s Paul Kafasis says:

Apple has gone too far. Rejecting an application because it might compete with Apple is simply indefensible. There’s so much wrong with it that I’m not even sure where to start. There are legal issues to consider, in terms of anti-competitive behavior. There’s the fact that Apple isn’t actually offering this functionality on the iPhone, so it’s not really competing at all. 

In the past I’ve stated my belief that Apple’s published restrictions are stifling innovation on the platform. However, that stifling is nothing compared to the chilling effect we’ll see from arbitrary rejections like this. The possibility of spending months on an application, only to never be able to get it to users because Apple decided not to let you in is an enormous risk and it will scare off talented developers. When that happens, everyone loses.

The decision is already stifling competition and innovation in iPhone podcasting software – but as this story picks up steam, it’s likely to keep all sorts of developers from building iPhone apps.