Earlier this month Google filed its response to the European Commission's Android antitrust complaint, which alleges that Google thwarts its competitors in search, mobile apps, and mobile devices by limiting their access to Android users through self-serving licensing terms.
But the EC's objections, rooted in an outdated understanding of marketplace dynamics, are a contrivance. They go like this: 'Google Search is dominant'… if you exclude Amazon and Facebook from its market. 'Android enjoys a monopoly'… if you forget about iPhones. 'Google excludes competing apps on Android' … if you ignore the ease with which users install alternatives.
In other words, Google in effect controls every significant on-ramp to the mobile Internet, and it uses its position to foreclose competition and forestall innovation. Except it doesn't. In the broader, messier markets of the real world, the way Google licenses its apps to run on Android has none of the anticompetitive significance the Commission claims.
The Commission's core complaint is that Google stifles competition from rival services by requiring certain Google apps to be pre-installed on Android devices. But if non-Google Android apps are having difficulty reaching users, the data sure don't show it.
Consumers today are far more capable and informed digital participants than ever before. When the EC brought its infamous antitrust cases against Microsoft in the early 2000s, finding and successfully downloading a competitor to, say, Internet Explorer or Windows Media Player on a Windows PC might have stymied many users. But today accessing alternatives to pre-installed software is a trivial matter.
Anyone with an Android smartphone knows how simple it is to hide or disable pre-installed apps, or to download new apps from Google's Play Store. None of Google's practices prevent such downloads, and the vast majority of apps---including rival search apps and browsers---are available for free.
And evidence suggests that consumers take full advantage of this flexibility. Google's app store offers almost 2.5 million apps, and users collectively downloaded them some 65 billion times in 2015 alone. Nearly 200 apps have been downloaded at least 100 million times each, and the top 20 apps have each been downloaded between 1 and 5 billion times. Consumers are finding and trying out non-Google apps at a furious pace, regardless of the Google apps that come pre-installed on our Android devices.
Apps like Facebook and Facebook Messenger are now ubiquitous. WhatsApp has become the world's most popular messaging service, having amassed a billion active users at a meteoric pace. Meanwhile, pre-installed Google Hangouts and Google+ aren't even in the same league.
Nor has the pre-loading of Google Search and Google Chrome on many Android devices deterred users from other search services. A staggering 40 percent of mobile browsing now happens inside the Facebook app alone. Specialized search apps from rivals like TripAdvisor and Yelp (among Google's loudest complainants) have each been downloaded hundreds of millions of times---and their access to users has multiplied accordingly.
None of which should be surprising, least of all to the EC itself. After all, when it cleared Facebook's acquisition of WhatsApp in 2014, the Commission's own investigation confirmed that consumers can switch between competing apps with ease. And the reasons it cited are only more applicable today: Apps are generally offered for free or at a very low price; apps are easily downloadable and use little storage capacity; users can easily switch between smartphone apps; apps are easy to use; and information about new apps is readily available.
Of course, Google receives some benefit from pre-installing its apps: Doing so provides a chance for the company to realize some return on its massive investments in the Android ecosystem by promoting its own products. Although Google requires many Android device makers to pre-install Google Search and to set it as the default (but not exclusive) search provider on their phones, this is hardly a bad thing: Search helps finance the development of Google's other (free) apps, as well as (free and open-source) Android itself.
Imagine what might happen if Google were prevented from requiring device makers to pre-install Google Search or the Chrome browser---the apps from which it actually earns substantial revenue---as a condition of pre-installing its other apps on Android devices. Google would likely then charge hardware makers licensing fees to pre-install apps like Gmail and YouTube, the cost of which would be passed along to consumers in the form of higher device prices. This would hardly be a net gain for consumers, given that they already enjoy unrestricted app choice at lower cost today.
Alternatively, Google could vertically integrate like Apple, exercising tighter control over the Android ecosystem. This would be no boon for competing app developers, who are attracted to Android's openness---just ask Spotify what it thinks of Apple.
Device makers would fare no better. Apple already consistently earns the vast majority of smartphone profits. If Android weren't available, if it were available only for a fee, or if Google charged hefty royalties for its apps, there would be even fewer device makers and devices, and they would cost more.
In order to reach its conclusions, the Commission defines several distinct markets in which Google competes, narrowly circumscribing Google and its rivals with rigid categories that can't begin to capture the ever-increasing diversity of competition in digital ecosystems.
The Commission complains, for instance, that Google unfairly dominates a market it calls “general internet search,” a feature that the Commission seems to think only search engines like Google and Bing offer. But 'general internet search' describes an activity that takes place on a far-wider variety of sites today, and users routinely turn to Amazon, Facebook, and Twitter as substitute providers for the searches they might once have run only on Google or Bing---yet none of these figure in the EC's market calculations.
Similarly, Android is just one platform among many where users and software providers connect. But, remarkably, the Commission's definition of the relevant OS market excludes Google's biggest competitor in mobile: the Apple iPhone and its immensely profitable App Store. It also neglects Microsoft's "Universal Windows Platform" which enables mobile apps to run on all Windows devices, from phones to Xboxes and PCs (which still comprise more than 90 percent of the market). That's an extremely attractive lure for mobile app developers allegedly excluded by Google's Android license terms. It's also a massive, ready-made distribution network for Bing, Cortana, and other competing Microsoft services.
The Commission weakly defends this narrow market definition by claiming that the cost to switch between these platforms is too high to make competition between them meaningful. But cloud services and cross-platform apps have rendered switching costs largely insignificant. In fact, Move to iOS, Apple's lone Android app, is designed to facilitate users' moving from Android to iPhone---something they are doing at record rates.
It's fairly easy to slice up markets to create the illusion of dominance in order to make a colorable antitrust case. It's another matter entirely to capture the complex dynamics of real markets in order to regulate them in a way that benefits real consumers.
What Microsoft is doing with its universal platform, and what Apple, Google, and Facebook have begun to replicate, are almost certain to transform the competitive landscape for both devices and software. Like the ongoing struggle between Apple and Google, these developments will continue to disrupt the market in ways simply not contemplated by the Commission.
Today, every OS and many social networks are locked in competition to be everywhere and do everything. Cross-platform apps and services; unified developer frameworks; the merging of desktop, mobile, automotive, and wearable devices; apps as platforms---these are the new reality. And they will continue to evolve even as the EC persists in trying to gerrymander yesterday's markets to fit today's competition.
As Larry Downes writes in his indispensable book, The Laws of Disruption, regulators have "too often heeded the siren call to do something, anything, to prove that digital life is not a lawless frontier." The urge is understandable. But it serves no one to try to pigeonhole digital competition into artificially circumscribed boxes just for the sake of doing something.
