FCC is All Talk

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The Apple Appstore is a flawed, yet brilliant model. I’ve never liked it. I’ve complained about the censorship it represents in several posts, but theiPhonefan base considered the trade-off – some censorship for excellent and easy apps, to be acceptable. The Appstore was brilliant because it put Apple in charge of their device, the AT&T; network (and other carriers worldwide), creates a revenue stream, and decreases churn.

The only way around the Appstore is to “jailbreak” the phone, which Apple reported last week as a “potentially catastrophic” threat to the nation’s cell towers.

When news broke about the Google Voice controversy, I blogged that day suggesting this is something different. Apple was censoring apps and developers daily with little explanation, but those apps didn’t have followers or a voice.

But this stunt with Google put the issue of the Appstore front and center. The telecom crowd I follow on Twitter is crying foul to Apple (for the first time). AT&T;, the convenient scapegoat for alliPhonematters, is somehow taking or getting the blame. But it was Apple that censored the apps.

The previously mentioned posting was titled Halo Wars, referring to the fact that both Google and Apple are largely considered the angels of telecom/IT. Apple for their innovative design and Google for their high quality free services. Apple hasn’t picked many fights with popular foes like Google, partly because there are very few companies with so much cache (and cash). In Seinfeld speak, Apple typically “has hand”, and in this case is “going to need it.”

There has indeed been an extraordinary amount of conversation about this event. Was Apple wrong? Was it AT&T;? Is Google Voice competitive to Apple? But when I refer to this conversation, it isn’t from Apple, AT&T;, or Google. They are pretty quiet.

It is like a craps game with a quiet roller and a quiet dealer – and a loud crowd. A loud crowd cheering and jeering at every event despite the fact these “events” have no significance.

The latest bit of rants comes from the decision of the FCC to investigate the issue. That is some powerful imagery isn’t it? I think of a yellow taped-off crime scene in front of Apple’s Cupertino headquarters. Fifty or so FCC agents running around the scene – all wearing navy windbreakers with huge white letters identifying them as “FCC.”

Great drama – could be a new Law and Order spin-off. Except for…

Not only is Apple well within their rights to censor any program they don’t like; but the FCC has abdicated their authority over it. In fact, it might be a stronger argument had the FTC showed up instead.

Consider:

  • Apple has never been secretive about their ability (or self appointed responsibility) to censor apps via the Appstore.
  • Apple censors apps quite regularly (daily?).
  • Apple is not a monopoly, but even if they were (though they are a smartphone market share leader) it would not be the FCC to investigate unfair practices. This would be the FTC or the Department of Justice’s Antitrust division.
  • Lots of Telephony related apps have been blocked by Apple – mostly on the grounds they utilize the IP network instead of the voice network for voice. That is what the FCC should be investigating.

The FCC is chartered with managing our wireless spectrum. They are using “pending FCC proceedings regarding wireless open access (RM-11361) and handset exclusivity (RM-11497)” as grounds for investigation.

I think it is great the FCC is investigating.

They may conclude America is better off with open access. Open access would allow applications like Skype or VoIP softphones to operate over the data portion (rather than wifi) of the cell phone. So far, the FCC has taken the stance that closed access is just fine. They may also conclude that handset exclusivity ultimately increases prices and hurts competition. But they haven’t found that to be the case yet either.

What they will find is Apple blocked Google because they don’t like Google or their Google Voice application. They will find that they have the precedent and support to do so, and that it can’t be anti competitive since customers agree to this in a clearly written two year agreement.

The only outcome that could come out of this investigation is the policies or rules should (or should not) be changed. It is highly unlikely that Apple or AT&T; will be found guilty of any crime or be forced (other than for public relations reasons) to change their position.

The Wall Street Journal reported this:

In a statement Friday, FCC Chairman Julius Genachowski said the FCC “has a mission to foster a competitive wireless marketplace, protect and empower consumers, and promote innovation and investment.” The inquiry letters “reflect the Commission’s proactive approach to getting the facts and data necessary to make the best policy decisions.”

Foster a competitive marketplace? Why don’t wireless carriers let me choose my long distance provider (international rates)? Why do all the carriers use different technologies? this whole “Take Back the Beep” campaign is a long overdue (20 years) lack of protection for the wireless consumer. They choose to investigate this?

But the best part is the “proactive approach” that Genachowski mentions. I might point out that Apple has been rejecting apps without detailed explanation all year. I might also mention that Google submitted their apps to the Appstore 6 weeks prior to rejection, and that the rejection occurred before the FCC investigation. I wonder what a reactive FCC investigation would look like.

This will play out one of two ways. Apple will either stick to their guns assuming that the vast majority ofiPhoneowners don’t know or care. Or, public pressure will change this one particular decision. I don’t have sufficient data to predict the outcome. Apple would love option one, but I don’t know how many of their customers actually care.

Which brings me to my final point. Apple and Google are competitors. Yes, I know this may catch some of you off guard. Eric Schmidt, CEO of Google, sat on the Apple Board (until today). But just last May, Eric was asked why he didn’t resign since they are competitors and he replied:

The possibility “hasn’t crossed my mind,” Schmidt told reporters before the annual shareholders meeting at the company’s Mountain View headquarters. “I don’t think Apple sees Google as a primary competitor,” he said.

Well, maybe not a “primary” competitor since Google doesn’t make hardware. But Google does make a browser, a cell phone platform, and an OS – direct alternatives to those made by Apple. So at least this controversy is clarifying some obvious things prompting Eric to resign.

I will just make one other minor point. Google Voice is currently a footnote in the Appendix of Google’s operating plan. This is an interesting topic and whatever Apple decides to do regarding Google Voice Apps in the Appstore will soon be completely forgotten – likely long before the FCC concludes their investigation.





Dave Michels