Most of you probably don't know that the zune's hardware is AM radio capable. It's also touchscreen, mic, HD external display,. etc capable. But there's 2 limiting factors why zune doesn't have AM radio
1) AM radio needs a loop antenna which is about 3 times bigger than the zune itself
2) MS doens't want to unlock all the features.
3) MS doens't want to write what's more than needed in the firmware.
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