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Apple’s Scorched-Earth IPhone Fight With Google

By Susan P. Crawford
September 24, 2012 8:20 PM EDT
Susan Crawford
Susan Crawford

In the article “Easter Island’s End,” Jared Diamond described the steps that led to the deforestation of a subtropical, fertile paradise.

Over a few hundred years, inhabitants used the gigantic palm trees around them as rolling surfaces on which to haul stones; they then used more trees to lever the stones into place on platforms. Competing chieftains built larger statues on larger platforms. Eventually, the last tree was gone and the island was covered only in grasses and shrubs, leading to starvation and even cannibalism. Diamond explains that there was no signal crisis:

“Gradually trees became fewer, smaller, and less important. By the time the last fruit-bearing adult palm tree was cut, palms had long since ceased to be of economic significance. That left only smaller and smaller palm saplings to clear each year, along with other bushes and treelets. No one would have noticed the felling of the last small palm.”

The Easter Islanders’ incremental march toward disaster is an apt analogy for Apple Inc. (AAPL)’s decision to keep Google Maps off the newly released iPhone 5, the latest of a series of steps toward control by powerful actors over users’ online behavior. The question is whether the pattern is clear enough for regulatory authorities to take action.

Smartphone Use

Apple has a strong incentive to protect its platform. Google Inc.’s Android is far more popular in the U.S. than Apple’s system, but the iPhone is particularly appealing to younger Americans -- two-thirds of whom already own a smartphone.

So iPhone users may be irritated by Apple’s removal of Google Maps -- not least because Apple’s own mapping software is sometimes inaccurate and doesn’t include directions for public transit -- but there is nothing they can do.

AT&T Inc. and Verizon Communications Inc. (VZ), meanwhile, have strong incentives to ensure that their subscribers remain loyal to their wireless services, and iPhone users may have lower churn rates. It’s a tradeoff, though, because the carriers are forced to heavily subsidize these new devices.

In return for subsidizing upgrades to the iPhone 5, the wireless giants hope to be able to reap higher revenue by shunting those users to their new shared data plans -- particularly as users are forced to pay extra fees for using more data than their plans allow and for connecting additional devices.

The plans themselves are likely to give AT&T and Verizon a greater share of the wireless market, because families and businesses will push to concentrate all their devices into a shared plan. The rebellious family members or employees who subscribe to T-Mobile will be under significant pressure to switch.

Verizon’s chief financial officer, Fran Shammo, has already announced that unlimited data plans are “going by the wayside.” That’s no accident because new Verizon customers have no choice but to go the shared data plan route.

AT&T (T) now blocks use of Apple’s videoconferencing application FaceTime over its cellular network by anyone who hasn’t bought a shared data plan. This means users will be subject to the carrier’s data caps and more likely to incur extra fees. Public-interest groups have criticized AT&T’s actions. The company is unmoved and has dismissed the complaints as “kneejerk reactions.”

Data Caps

These incremental gestures toward concentration become more meaningful when you include the wired marketplace, where Comcast Corp. (CMCSA) and other geographically clustered cable companies are dominant. In this area, data caps are also in place and companies have the ability to decide how to treat individual applications. There is little effective competition in the data market from the wireless carriers and little effective oversight. In fact, Verizon is already cooperating with Comcast.

Users of the iPhone whose maps application was swapped out when they upgraded to Apple’s iOS 6 platform have had a glimpse of what the carriers’ power could entail: Just as Apple chose to remove its reliable maps app that used Google (GOOG)’s data when the two companies’ business relationship became complicated, the cable companies can make services such as Netflix subject to data caps while exempting their own online video offerings. Users may be irritated, of course, but there’s nothing they can do about it.

Anil Dash, the co-founder of the media and technology consulting firm Activate.com, said last week that the move against Google Maps was the first time Apple had put “boxing out competitors” ahead of serving the interests of iPhone users. Similarly, a vertically integrated, market-dominating carrier such as Comcast could now employ its usage caps (which wouldn’t necessarily apply to its own or affiliated services) to effectively squeeze out competitors providing information, entertainment or connections that Comcast didn’t want to support.

The best way to describe the Apple-AT&T-Comcast narrative might be “creeping normalcy.” We should remember what happened to the people of Easter Island as they chopped down their forests, bit by bit, until it was too late and their civilization was destroyed.

(Susan P. Crawford is a contributor to Bloomberg View and a visiting professor at the Harvard Kennedy School of Government and Harvard Law School. She is a former special assistant to President Barack Obama for science, technology and innovation policy. The opinions expressed are her own.)

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To contact the writer of this article: Susan P. Crawford at scrawford@scrawford.net or @scrawford on Twitter.

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net.

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