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It's really very simple: indifference until it starts hurting them. People do know that about the Facebook Cambridge fiasco, but it didn't actually hurt them so they don't care.

There are options for the security conscious however: get a model that doesn't even really run code much at all (like a single function cell phone) or get a model that supports LineageOS, where you can choose to not install Google Play at all or as little as possible: from here, start with Pico and manually install if needed https://opengapps.org/?api=8.1...

I've been using the Lineage OS nightlies for about 1 year. So far I haven't had any issues. But I should note I haven't really done anything too unusual with the system. It just runs some common apps from the Google Play Store. I haven't even enabled root on it.

Speaking of Google Play Store the installation process is still the same as it was last year. Go to https://opengapps.org/ pick the version you want/need and install/sideload it with TWRP (or similar program). Just remember to install the Play Store immediately after you install Lineage on the system. Like, don't reboot into the newly installed OS without installing Google Play Store. Otherwise there may be crashes.

Almost no custom roms these days ship with Gapps. http://opengapps.org/ has made that unnecessary and often undesirable (as many custom rom users opt to go Googleless.)

It's not illegal to host or download the Gapps suite. It only becomes trouble if you attempt to use the apps on a non OHA certified device. At which point you have violated the license of the software, but the legality of that matter would depend on your jurisdiction (though this is probably illegal for anyone in the states.)

I don't know if ZTE can remain OHA certified under these new limitations, but I don't think the OHA is a strictly American concern. Assuming that ZTE can maintain their OHA certification, they should have no problem shipping devices sans-Gapps and just providing instructions on how to visit http://opengapps.org/ to acquire your own copies of the software. It's pretty easy to do.

Almost no custom roms these days ship with Gapps. http://opengapps.org/ has made that unnecessary and often undesirable (as many custom rom users opt to go Googleless.)

It's not illegal to host or download the Gapps suite. It only becomes trouble if you attempt to use the apps on a non OHA certified device. At which point you have violated the license of the software, but the legality of that matter would depend on your jurisdiction (though this is probably illegal for anyone in the states.)

I don't know if ZTE can remain OHA certified under these new limitations, but I don't think the OHA is a strictly American concern. Assuming that ZTE can maintain their OHA certification, they should have no problem shipping devices sans-Gapps and just providing instructions on how to visit http://opengapps.org/ to acquire your own copies of the software. It's pretty easy to do.

Yes, they actually have autoupdates (update available, download and install options). You'll need to make sure you flash a recent enough recovery image to make use of the autoinstall, and it didn't seem to work for my tablet but then I suspect the recovery image was too old. There's also the question of how often you'd want to apply weekly updates that are potentially buggy, too. Apart from the initial LineageOS install using TWRP, you'll likely also want to put a minimal version of Open GApps on too. Really the only scary bit is getting the inital recovery image on and bypassing any existing vendor security. The actual Android and GApps sideload is painless and easy.

From the about section of the page whose URL appears in your comment:

Take note that Open GApps does not provide you with any license for Google’s APKs included in the package. The Open GApps packages merely provide a convenient way to sideload APKs to your device. It is your own responsibility to obtain the proper permissions by e.g. buying an OHA-licensed device with pre-installed Google Apps and/or acquiring the applications from Google’s Play Store.

If you install Open GApps on a device other than "an OHA-licensed device with pre-installed Google Apps", you lack "the proper permissions". This makes your use of Open GApps an infringement of Google's copyright.

Somebody can want Android without wanting the entire collection of Google apps. Apps for Google services that are pre-installed typically include Chrome, Gmail, Maps, Calendar, Photos, Hangouts, Books, Games, Movies & TV, Music, Docs, Sheets, Slides, Drive, Google Settings (that's separate from the Settings app that deals with basic OS stuff), and YouTube. I use the Google infrastructure extensively so I'm happy to have all of those around, but other people may prefer alternatives or not use those functions at all.

Worst of it is these apps take up space in the initial load, and they have undoubtly been updated. So space is taken for the factory copy, plus the update pulled from Play store. Same idea with the OS. Flash storage always has the factory OS (with outdated google apps) PLUS the updated OS (with copies of outdated google apps) PLUS the latest update to these apps.

Installing a clean ROM, and Opengapps pico or nano Then you only have the up to date copy of only the apps you want. I'll install Chrome, Gmail, maps, Youtube... that's about it.

Going from a Tablet that shipped with ICE + several Jellybean updates, to a clean ROM of Marshmellow with Opengapps pico, I was surprised at how much less space was taken by the base OS.

Without the Play Services, what do you actually use on the phone?

Play Services

My phone came with Play Services, arguably I'm entitled to run them. Who cares where I got them? Google apparently doesn't care.

Now, with that said:

Do you have a decent map application?

osmand

What email app? Does it have push notifications?

The default app works, although it does not have push notifications. Poll more.

I assume you don't use YouTube or any other streaming services either. Is it really a "smart phone" without the apps.

There are apps.

Do you huntdown and manually install all your apps?

You could do, or you could use getjar or f-droid...

How many work without adsense or other google services?

Lots don't. Many do. If you get them from one of the above, they won't.

CyanogenMod was great, but without installing Gapps it seems a bit pointless to me. How many people honestly run a mobile device with no app store?

Cheap phone plus CM equals bitchin' feature phone.

But seriously, installing gapps is not hard.