[twoodfin]

This is pretty much my theory as well, though I am agnostic on whether it ends up as a set top box or a full TV. Maybe both: If they go with a carrier subsidy model, they could hand out a set top box at a price of more or less free, and offer some gorgeous TV with their usual margins. With the subsidy subtracted out, the sticker shock might not be outrageous. (Just pay no attention to the two year "Apple TV" contract...)

But assuming Apple does this at all, the big picture I think is nearly inevitable: Apple allied with the carriers, offering a device with a UI completely controlled by Apple, providing both traditional and "app-style" television, backed by those big data centers. It's certainly technologically possible for them to end up recording every channel in the U.S. for playback on demand, and I suspect that's where many of the tough licensing issues come up. How much control is Apple willing to cede to the networks (and vice versa) over "viewing windows" and what have you?