Re: I do not install anything asking for this permission
And remember, this was demanded of app devs before they would even start developing apps on Android.
Personally, I think this story is a little apocryphal. Furthermore, it's entirely irrelevant.
Regardless of any so-called commitments made to app developers in the past, Google should just say "in the best interest of users, and in a world increasingly hostile to user privacy, we are now giving users more control over permissions." Android already has a great market share (over 60%), and it would only increase if Google start giving users proper control over their privacy. And as time goes on in this post-Snowden world, user demand for this will continue to increase.
Google makes almost no money from developers. They make money from ads, and a little by taking a cut from play store sales. Users not installing apps means users not seeing those ads and not paying for those apps in the play store. It is in Google's financial interest to put users at ease by giving them the power to install apps they would not have otherwise installed due to security/privacy concerns. Furthermore, this has a double benefit of hurting their advertising industry competitors who are making dirty money selling contact data harvested from dodgy apps etc, because users will stop giving contact access to those apps.
If developers leave the market or make their apps unusable upon Google giving users more control, it is their loss and they know it. Android has a growing market share and developers would have to be idiots to just give that up.