The European Commission (EC) recently slapped Google with a $5 billion fine for abusing its monopolies over general internet search, mobile operating systems, and apps stores for the Android mobile operating system. Google CEO Sundar Pichai accused the EC of issuing a “competition decision against Android, and its business model.”
Mr. Pichai is doubtless correct that the EC decision implicates Android’s business model. Google chose the model precisely because offering its mobile operating system to device manufacturers for “free” was the most likely way to establish an Android monopoly. In his book Dogfight, tech journalist Fred Vogelstein noted that Google always understood that markets for operating systems have historically been winner-takes-all: “if you get enough people using your technology platform, eventually it creates a vortex [through the economic principle of network effects] that forces almost everyone to use it.” Google hoped that licensing Android for “free” would create such a vortex by maximizing the operating system’s distribution across as many different manufacturers and devices as possible. According to Bob Lee, a top Android engineer when it launched, Google’s “free” licensing model would “turn [Android] into Windows [for mobile] with a ninety-eight percent market share, and … the iPhone would ultimately end up with just two percent market share.” Android has largely met those expectations, with a worldwide marketshare (excluding China) for licensable smart mobile operating systems of more than 95% and about 80% overall.
Acquiring Android in 2005 and turning it into a Windows-style monopoly was the keystone of Google’s mobile internet strategy. Google “understood early on that the shift from desktop PCs to mobile internet, which started in the mid-2000s, would be a fundamental change for Google Search” and the company’s digital advertising empire writ large. To extend its empire to the mobile internet, Google needed to ensure widespread availability of its apps and services on mobile devices and that Google’s servers had real-time access to mobile consumers’ locations.
Competition among device manufacturers and mobile network operators made both factors challenging on the mobile internet. The lack of a dominant Windows-like operating system for mobile devices meant that Google had to code multiple versions of each app and negotiate separately with multiple device manufacturers and mobile network operators to ensure Google’s apps and services were pre-installed on all mobile devices. Google also had to negotiate separately for access to devices’ location capabilities, which was complicated by legal restrictions on mobile network operators’ use of location data and device manufacturers’ concerns about consumer privacy.
Android’s dominance would solve both problems for Google. According to the EC, Google has used its Android monopoly (1) to ensure its search and browser apps are pre-installed on Android devices, (2) to grant financial incentives to large device manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on all of their Android devices, and (3) to prevent device manufacturers from using any alternative version of Android that is not approved by Google (so-called “Android forks”). Google has also used Android to control the collection of location data on Android devices and discourage competition in the market for location-based services.
While its strategy has been successful, it was not obvious in the mid- to late-2000s that Android would become a monopoly or that Google would get away with abusing it for so long. Google needed to convince a critical mass of device manufacturers and mobile network operators to support Android while downplaying the potential for monopolization and Android’s reliance on the exploitation of consumers’ private information to turn a profit, a practice known as “surveillance capitalism.” If it succeeded, Google would face the challenge of avoiding the same fate as Microsoft, who was found guilty of antitrust violations for engaging in similar practices with its Windows operating system for PCs.
Google’s strategy for overcoming these challenges was to galvanize the support of policymakers and the public for its Android business model before a single device was sold. It launched policy and public relations campaigns in 2007, about a year before its first phone shipped, that portrayed Android as a white knight of “internet openness” that would rescue the mobile internet from its allegedly “closed” approach to mobile devices. Google’s narrative painted mobile network operators as villains bent on hobbling the mobile internet and Android as an almost philanthropic endeavor to give consumers better mobile experiences while downplaying Android’s role in expanding Google’s digital ad monopoly and its pervasive tracking of consumers’ locations.
Google has used its open internet narrative as a sword and a shield. It used the narrative as a sword to convince the Federal Communications Commission to adopt regulations ensuring that Google could sell Android devices in a critical spectrum band for mobile broadband, which provided certainty to device manufacturers early on that Android would be widely available on at least one major mobile network in the United States. Google has used the narrative as a shield in every legal or policy action involving Android and its business model, including the EC’s antitrust case and the current debate over privacy regulation in the United States, as well as to foster goodwill with the public.
In Google’s view, Android’s monopoly is justified by the benefits of its “free” distribution. In Mr. Pichai’s words, “a healthy, thriving Android ecosystem is in everyone’s interest.” The EC’s decision presents an alternative view: that letting Google abuse its Android monopoly serves the interests of Google while harming everyone else. A fair application of U.S. antitrust law would reach the same result. If letting Google exercise unfettered monopoly control over access to mobile devices is the price of “free,” that price is too high.
In response to my request for comment, Google referred to Mr. Pichai’s blog post.
