As a developer, one of the things that was more appealing to me about Android was that Android seemed to be a more level playing field. But this approach tilts things substantially in favor of Google.
In particular, this solves fragmentation for Google, and maybe for Google trusted partners, but it doesn't seem to do so for any other Android developers.
I don't think anybody's saying the Play app should be open source. But if I were making my living from Android apps, I'd worry that Android improvements would be few and far between. Both the technical and business incentives push to improving Play Services, not the base OS.