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I think Spotify would have been in a great position to argue with this, since they're the closest to being a worldwide provider for music services.

Google Music and Rdio aren't available outside of the US/Canada.

Are there alternatives to Spotify's current business model of free on the PC?

Grooveshark? Although legally, it's in a grey area...

The legality of Grooveshark's business model is Groovehark's problem. Just using it passively as a music consumer is likely fine.

I'm aware of Grooveshark but, as you said, it is questionably legal. It has long been removed from the iOS App Store.

I can't help but wonder if these were the onerous terms that Apple would not agree to with Ping.

Check out MOG. They have some sort of free option.

That sounds like a 'Facebook Tax', like Microsoft does to the PC industry.