Saturday, October 06, 2012

i[Carter]Phone? -- Apple and Anti-Competitive Tying

Apple is pushing the laws prohibiting anti-competitive behavior, as noted in an interesting article by James Stewart in today's NYTimes, with reference to Maps and the iTunes Store.  It considers how Apple's efforts at total control of their ecosystem may be both harmful and illegal--at some point, if not yet.

For some time I have had similar concerns, and have been wondering how long until we see an "iCarterPhone Decision."  What do I mean by that?  Followers of communications history will remember the Carterfone Decision (1968) as a landmark step toward the breakup of the Bell System monopoly. Until then it was illegal to attach a phone not approved by AT&T to the US telephone network.  This was based on the AT&T argument that attaching any device not fully tested and approved by them to the network might introduce voltages or other electrical effects that would run through the wires and harm their central office equipment, potentially causing widespread harm.  The only permissible way to add a specialized device like the one sold by Carterfone was to use a Rube Goldberg-like acoustic coupler, with rubber cups that relayed sound in or out of a standard Bell telephone handset ear and mouthpiece  with no direct electrical connection (and with issues of signal quality).  Some of you remember early modems that connected to computers that way. The Carterfone Decision changed all that, and opened the way for the vibrant market in phones, answering machines, faxes, modems, etc. that we now take for granted.

The iPhone/iTunes ecology smacks of much the same kind of anticompetitive control, with restrictions that limit consumer rights, raise consumer costs, and limit competitive innovation.  The Times addresses the current flap over Apple's inferior maps app, as well as Department of Justice price fixing charges against Apple relating to e-books sold through the iTunes Store.  Similar issues apply to control of apps in general that Apple does not like for one reason or another --such as has been the case with Skype, Google, Flash, and many others.  Contrast this with Microsoft PCs that allow you to run any software from any source, with no involvement of Microsoft whatsoever.  Of course we are free of migrate to the Android ecosystem to get greater openness, and many have chosen to do just that.

As the Times article notes, Apple is not dominant the way Microsoft was (or AT&T), and thus its tying sales in the App Store may not reach a level actionable under antitrust laws. (Its alleged price fixing is another story.) But at an ecosystem level, given its disproportionate number of apps, it does already have a level of dominance that might warrant correction.

Other areas in which Apple is riding roughshod on the market (and consumers) relate to other kinds of proprietary behavior.  Apple champions open standards like HTML5 over proprietary standards like Flash when the proprietary standards belong to the competitor, and it suits their interests to smash them , but insists on proprietary standards of its own, such as for its iPhone connectors and its AirPlay protocol, for which it charges exorbitant prices (adapter retail $29?) or licensing fees (AirPlay speakers retail price bump $100?).

It will be very interesting to see how this develops -- whether the market rebels or the government finds cause to draw a line, or they just fail to maintain their edge.  From the market perspective, Apple is walking a very fine line, balancing the positive perception of product quality against the negative perception of arrogance and rapaciousness. Jobs was able to ride that balance for a very profitable run, but the maps fiasco, and the increasing success of Android (and maybe Microsoft, or someone yet to appear) suggests that this is a precarious and anti-consumer position, and that Apple's days of dictating to consumers and its ecosystem partners may be numbered.


  1. I am not a fan of both companies. If I like the performance of the unit then I will probably buy it because of that reason only. They should just focus on developing their products and not on their popularity

    -Sylvanna Chains

  2. "They should just focus on developing their products and not on their popularity" - I definitely agree to that. Instead of trying to gain more popularity, why don't they just develop their products more and add features like video conferencing, better searching and built-in apps that are free.

    - Justin Leo

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