Taking Back the Market

Competing Visions: Apple, Google, and AT&T Have Different Priorities

Tim Nash - 2009.09.03

A previous article, FCC Investigation of Apple's Google Voice Rejection Could Become a Political Mess, looks at why the FCC should let the market decide.

A small world seems to be split between Google lovers and Apple lovers over Google Voice for the iPhone. Any AT&T lovers are staying well hidden.

As for the FCC, who loves a bureaucracy unless it is giving you what you want?

The FCC's Role

A little perspective, and the answers to the FCC questions can be seen as a PR exercise and an initial skirmish in the next battle of the Internet. Google and Apple know that Microsoft has been slow to react to the opportunity and, while under current management, is very unlikely to catch up. The FCC has plenty else to do, rather than entangle itself in an area where it lacks the authority to enforce a decision.

Recommending limits on cellphone exclusives seems a higher priority, certainly for the Senate. Sorting out various fees like those for text messages is another. Increasing network capacity seems to be another. Deciding at what point VoIP should be available on all networks is another. So the current FCC response, after having the sense to stand back, is to review innovation in the wireless industry - that is, to look as though it is doing something in this area.

Stepping on Each Other's Toes

Apple, having created the iPhone platform, doesn't want any single company to dominate a major part of its market. In effect, swap Microsoft for Google, particularly as Google offers a rival platform. Apple knows only too well what happens when new versions of critical software are delayed while being readily available on a rival platform.

If Google had thought beyond the software - the "wouldn't it be cool if we made it like this" stage - it would have recognised Apple's paranoia on the subject. Basically, if Google wants Apple as more than an occasional hands-off partner, it needs to divest itself of all involvement in operating systems like Android and Chrome OS. (See Is Google Apple's Partner or Competitor? for another perspective.)

Even that may not be enough, as Google seems to have decided that the best way to compete with Microsoft is to offer an "ad supported" equivalent of as much as possible - and Apple doesn't believe the "Do No Evil" company slogan.

Don't Compete with Developers

At least Apple has recognised a large part of Microsoft's developer problem. Apple so far has concentrated its development efforts on improving the platform, not on developing apps. It is staying away from competing with developers who offer more than OS add-ons. Apple doesn't need to keep expanding its in-house app portfolio to make money, so it made a sample game and left the field open for all those who are reasonable about the rules.

When you join any community - be it a church, group, or online- you agree, implicitly or explicitly, to obey the community rules. If you don't want to, you leave or are asked to. Some of those rules are written, some are unwritten but should be obvious, and in the grey areas you tend to be given the benefit of the doubt if your overall contribution to the community is positive (or likely to be). To enforce the rules, many online communities have moderators, and, for better or for worse, it is Apple for the App Store.

The App Store rules are a series of Apple guidelines, the AT&T customer Terms of Service (in the USA), and the previously discussed Unwritten Rule behind App Store Rejections, which says that if an app is likely to take away business from Apple or the carrier, it will be rejected.

VoIP vs. Carriers

Google Voice's cheap international calls breaks both the unwritten rule and the AT&T/Apple agreement "not to include functionality in any Apple phone that enables a customer to use AT&T's cellular network service to originate or terminate a VoIP session without obtaining AT&T's permission" (from Apple Answers the FCC's Questions).

However, if enough people decide to leave AT&T and the iPhone because using Google Voice over the Web isn't good enough, I'm sure Apple will let Google Voice be part of the App Store. So even if you believe the future of telephony is VoIP - and I do - apps that offer it will be restricted to WiFi until either the FCC orders all US carriers to make it available or AT&T sees that it won't have a business without it.

The trouble with VoIP is not that it is disruptive technologically - voice went digital decades ago. It is that people expect VoIP to reduce their phone bill to almost nothing, and currently minutes are the usual way for deciding how much we pay the carrier. Data download plans are an add-on. It will take time and a lot of marketing for most to switch from "numbers of minutes" to "amounts of data", especially if there is little difference in the monthly bill.

It is the size of that monthly bill that, apart from the costs of running AT&T, funds the network improvements and pays back the cost of buying wireless spectrum in the FCC auctions - and subsidises iPhones. And the subsidy is what persuades many to buy an iPhone plan. As Tim Cook said in the last conference call "smartphones in general are being sold in larger numbers and environments where postpay is the primary payment mechanism". Until Apple knows how to sell large numbers of iPhones to the prepay market, a drop in monthly bills means a drop in subsidies means a drop in iPhone sales.

Google and the Cloud

Another part of the Google vision is that automatic synching of address book contacts into the Google cloud is desirable. It is certainly desirable for Google, and you may even think it is desirable for you, if you are asked about it.

However, if you have business contacts on your iPhone, your company may not feel the same way. As the new OS X links to Exchange, it will make adding corporate contacts much easier. Approval of Google Voice could have stopped iPhone take-up by major organisations, especially as Apple has "yet to obtain any assurances from Google that this data will only be used in appropriate ways." Elsewhere in the conference call Tim Cook said "almost 20% of the Fortune 100 have purchased at least 10,000 units or more and there's now multiple corporations and government agencies who have purchased in excess of 25,000 each", so this would be a heavy loss.

Software for mapping social networks has been around for years. If Google analyses what kind of links you send to your friends from all the links you look at in Chrome, Maps, etc., it can send you highly targeted ads. That may not cause you a problem in your social life, and Google's business is advertising - the more effective the click-throughs, the more of the ad business will go to Google.

Is Google Good for Business?

There could be a more serious issue when analysis and targeting is extended to any business contacts you look up during business hours. Your company could start losing sales if those leads are passed to a competitor, and what is advertising but a way of generating sales leads for a business. But maybe you want to trust that Google will "do no evil". Apple obviously doesn't or it wouldn't have asked - or maybe it just prefers the realism of "only the paranoid survive"*.

Google writes plenty of good software, and much of this is available on or through the iPhone, but does it believe the power of its vision will sweep all before it, that it is the child of destiny? If it does, there is obviously going to be a clash with Apple, which strongly believes in a competing vision. This clash is an updated version of "What programs run on the PC? What programs run on the server?"

For Apple, the iPhone platform is a Mac in the pocket, and the Cloud is for backup. For Google, life is only lived on the Cloud. Neither vision will win out totally, but where the boundaries are set is worth billions. LEM

*former Intel CEO Andy Grove

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Tim Nash is a Director of WattWenn which has a new approach to scheduling the production of TV and movies to make the most of budgets. The views in this article are his own and are prejudiced from spending more years working for computer companies than he cares to remember.

Tim lives with his wife, her website on the area ariege.com, two daughters, a cat, and a dog in the French Pyrenees. He lapsed for a while after the Apple II, but became a Mac fan when his wife introduced him to the Macintosh IIsi. If you find his articles helpful, please consider making a donation to his tip jar.

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