Tuesday, October 2, 2012

EU to Probe Microsoft, Google -- Will They Eventually Turn to Apple?

The European Union is reported (http://www.reuters.com/article/2012/09/27/us-microsoft-eu-idUSBRE88Q0DW20120927) to be investigating potential fines against Microsoft and Google. Microsoft is being investigated over the use of Internet Explorer as a default browser for Windows. Microsoft had previously agreed to offer users a choice of browsers when they installed Windows, but had reported that a 'technical glitch' resulted in distribution of copies of Windows that did not offer users a choice. Google is under investigation over allegations that search results on Google favor Google products in the results delivered.



I understand that both of these cases rest on settled law in the EU. However, it does leave businesses in a puzzling situation. I am familiar with the argument for illegal tying in the United States and I suspect that the EUs findings rest on similar arguments. But from a practical consideration is it unreasonable for Google, for example to promote its own products on a service that it offers for free?

Many years ago, I ran an ecommerce web site and we offered a vertical search engine and news portal solely as a promotional device to drive traffic to our business. Admittedly, our traffic was no where near the dominant levels enjoyed by Google, but we simply saw the service as a promotional strategy.

The situation with Microsoft and Internet Explorer may have implications for Apple Computer and IOS. The question becomes one of defining what services are core to the operating system and what services are add-ons. Spefically, when is an included service necessary to deliver an operating system and when is it an illegally tied add-on.

In terms of precedent, its not clear what features are core to the operating system. At one extreme, an agrument could be made that the operating system only deals with resource management and not with the user interface. In this line, the BSD at the core of the Mac OSX is the 'operating system'. However, others would argue that the strength of the Apple experience is their ability to carefully control all aspects of the user interface, and that Apple control is necessary to deliver a complete experience.

Comparing the IOS situation to the Microsoft and IE precedent, it looks like there may be significant issues ahead for Apple. On a direct comparison, it is not possible to replace the default Safari browser with another default browser. Even if an alternative browser is installed, Safari will be the application that opens in response to the selection of a URL in other programs. And, it goes beyond the browser. Options such as alternative keyboards (Swiftkey, Swype) are not available in IOS. Apple is restrictive about the programs that are accepted in its web store. Arguments both pro and con have been made about the reasons for Apple's policies and the value of the curated Apple App Store. However, the bottom line is that Apple controls the user experience.

Given the EU's rulings on Microsoft and Google, it is hard to believe that they will not also have problems with Apple. At this point the argument will begin anew. Is the IOS approach anti-competitive, or is it necessary to deliver a complete user interface?

It will be interesting to see where this issue goes.

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