Friday, February 18, 2011

Is Apple In Antitrust Violation?

Apple has built a powerful tablet in the iPad and the best mobile device with its iPhone. And it supports its products with an App Store to feed it content. It remains the most forward thinking company among scores of others. But that front runner status also causes trouble and the rise of online subscriptions through the App store is causing ripples. "The Justice Department and Federal Trade Commission's interest in Apple's new subscription service is at a preliminary stage, and might not develop into either a formal investigation or any action against the company. But it comes as Apple has attracted growing antitrust scrutiny in the U.S. and Europe."

So Apple has built an aggregate site; why can't others. Shouldn't companies be allowed to build apps that can be downloaded without going through the Apple digital store. Perhaps that is the crux of the issue. The app site enables convenience and that convenience is worth something. If the apps store is what drives higher subscription rates, than perhaps the commission charge is justifiable. But if good marketing can push consumers to find apps outside the store, then all the better for competition.

"To make a case against Apple, antitrust enforcers would have to show that Apple has market power and is abusing it. That depends on how they define a market. Apple's iPhone is the phone of choice for many affluent consumers, but it has only a 16% share of smartphone sales and a sliver of the broader mobile-phone market." And the tablet market is still in its infancy. I hate to see government regulation slow down innovation, but it is also important that barriers to entry remain low to encourage more competition.

1 comment:

  1. Andy,

    First, nice new layout.

    Second, if we designate a market by a percentage of market share, then something that dominates the U.S. is only dominating less than 5% of the worldwide market.

    The fact is that few people have more than one smartphone, so once Apple owns a consumer in the smartphone market, they pretty much have exclusive power over that person's smartphone media/services/apps consumption. So if there are 40 million iPhone/Pad customers, that's 40 million customers developers cannot reach on the smartphone platform without going through Apple.

    Apple counters that developers are welcome to do whatever they want in the browser. If you don't want to pay Apple its 30% to be in the App Store and allow in-App purchases or handle in-App subscriptions, just do it as a web app.

    Obviously the App Store gives you more opportunity for exposure, but Apple is perfectly justified in charging for that.

    It's the fact that web apps do not have the access to iOS internals/fundamentals where Apple will get nailed. Remember that one of the things Microsoft got nailed on was not giving third parties access to the same deep APIs as Microsoft's own products and those of preferred partners, so that the third party apps could not run as efficiently or as effectively, putting them at a competitive disadvantage.

    The fact is that web apps in the browser and native apps from the App Store are not on a level playing field. And it's not that Apple charges 30% to be in the App Store, it's that they deliberately make it impossible to side-load apps from external sources.

    The thing that will nail them is that unlevel playing field and the single point of entry combined with what could be 60+ million U.S. consumers once the Verizon iPhone rollout is complete.

    I don't care what percentage of the market it is, 60 million consumers is a big enough market in and of itself to warrant scrutiny and penalties.