Although its quite a bit above my head, its something to do with the restating closed accounting books if they release an update adding new features to a device that is not based on a subscription model, but required research and development to create. </whew>
The issue first came up with the 802.11n enabler back in early 2007. You can read more about it here (and generally speaking, the same applies to the touch)
http://www.macalope.com/2007/0...acalope-do-everything/
Apple is required to charge you for the enabler. 802.11n was R & D intensive; it?s not your granny?s WiFi. You can?t amortize R & D costs against new products?in this case, AirPort Extreme and Apple TV?and then give that same R & D away somewhere else. That would create what?s called an accounting irregularity, and these aren?t popular at places like Apple and Dell just now. The only way to put 802.11n into existing Mac users? hands was to turn it into a product against which R & D could be charged.
If Apple had given the enhancement away free, Apple?s auditors could have required it to restate revenue for that period and could possibly have required Apple to start in the future to defer all the revenue from computer sales until all such enhancements are shipped, this person said. That would have had a devastating impact on Apple.
And here is another article relating specifically to the $20 upgrade for firmware on the iPod Touch
http://news.cnet.com/8301-1350...50999-20.html?hhTest=1
The short story for those who got to class late is Apple must charge for substantial enhancements to products that do not have revenue recognized on a subscription basis or it has to restate prior earnings. The iPod touch does not have revenue recognized on a subscription basis. The iPhone does. As does the Apple TV. Hence, they get free updates and the iPod touch does not.
It's a somewhat complicated accounting convention and perhaps you can argue that the iPod touch revenue should also have been recognized on a subscription basis, but then it raises the question as to whether or not all iPods should have their revenue recognized that way and pretty soon it all devolves into communism and everyone's getting everything for free and even Randy Newman doesn't want that.
As for the price and whether or not you want to spend money for upgrades - That's up to you. Apple set a price and you can choose to pay or not.
And just to clarify, they don't charge for all firmware updates, only ones that add notable features. Bug Fixes, stability enhancements, and speed improvements are all free. To say they don't support their products after one year is just patently incorrect, they do, you just can't get the firmware with added features unless you pay up.
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