Apple, The Appeal Of Open, And The Case For Closed
Back in 2001, when AOL was acquiring Time-Warner, the FCC ruled that the company’s instant messaging network (AIM) could not add new advanced features — specifically audio and video capabilities — unless AIM was reworked to allow interoperability with other services, specifically MSN and Yahoo Messenger. AOL opted not to open its service, and simply put off adding those capabilities for years, obviously deeming that the value of remaining closed was greater than the benefits of adding those features.
Yahoo and MSN did roll out audio and video capabilities and slowly gained on AIM, and those two companies made their Messenger products interoperable in the mid ’00s. AOL petitioned the FCC to allow the firm to add the denied capabilities without undertaking interoperability, since the competitors had gained significant market share. The FCC agreed, and so we have an AIM network that only interoperates with those other services that have licensed the right to connect, such as Apple, which has integrated AIM with iChat.
Apple seems to have picked up where AOL left off with respect to open integration: it picks and chooses its partners very very carefully, and closes the door to others. And it might take an act of the government to goad them into opening up. Does that make them evil?
On one hand, an argument can be made that a company like Apple that has devised a system like iTunes wants to provide a top-notch user experience to any end user using the iTunes software. Therefore it follows that Apple would want to manage who is connecting to iTunes and how that connection works.
Apple seems to have picked up where AOL left off with respect to open integration: it picks and chooses its partners very very carefully, and closes the door to others. And it might take an act of the government to goad them into opening up. Does that make them evil?At the same time, a competitor to Apple’s iPhone, like Palm, wants to integrate with the market dominant iTunes. They can make a case that their users would be benefited from this access, since otherwise they would have to move their music out of iTunes which would be a potentially expensive and complex process. This is a non-starter for many people, so Palm decides to go rogue and simply reverse engineer access to iTunes without Apple’s permission.
This is much like the IM ‘multi-headed client’ wars of the late 90’s and early ’00s, when Adium and others would carve a hole in the security surrounding AIM’s Oscar protocol and Yahoo and MSN Messenger, and briefly provide a sort of interoperability. At least until the engineers pushed a new version of the protocol and IM clients that would plug the breech again.
As I said at the time, the Federal government should have stepped in and required all the major players to devise an interoperable solution, so that anyone could chat with anyone else no matter what IM networks or systems were being devised. When pushed on the subject, executives from the major companies would state that the barriers to this were not technological, but business related. Translated, that means they were happy making the money that their IM solutions enabled, and saw a possible loss af revenue from interoperability. So, in the past decade, we have muddled along with a fragmented IM universe, which is clearly not in the public interest, but no public figure has made a strong enough case for interoperability.
At the same time, the US government forced cell carriers to support local number portability and interservice text messaging, explicitly for the public interest.
So, looking at the Palm Pre and Google Voice situations I wonder: is this an interoperability analog, or more like patent protection? Apple has invested boatloads of money to devise a breakthrough software and hardware solution around digital music, based on iTunes and iPod. They negotiated deals with music and movie labels that were unprecedented, and ushered in an era in which digital music is the norm. They have made bazillions from this innovation, yes, and they argue that the user is better off by Apple’s continued control of this ecosystem.
Apple’s is an argument similar to those pharmaceutical companies make in favor of high prices for new drugs: it takes billions in investment to bring them to market. And while the government regulates this system closely, we do allow patenting and profit making to take place.
You could make a case that the iPod is an example of Apple’s continued design savvy. Some other companies were perhaps better positioned to create the iPhone, like Nokia and Palm perhaps, companies that missed the direction that Apple pioneered with touch and always-on connectivity. Nokia and Palm now must play catch up, since they painted themselves into the corner by considering cell handsets as commoditized and interchangeable endpoints on commoditized and interchangeable cell networks.
Consider Google a Walmart. They seem friendly, they want to sell us goods at lower cost, and will bring new jobs to the community. But ten years later, downtown is dead, the strip malls blight the edge of town, and a family in Tennessee are bazillionaires.Apple has redrawn the commodity map of the territory, and rejected the idea that the handset is a commodity. To accomplish this, however, requires the network and other services to be managed in a way that blocks anything that would apply the old map onto the new territory. So Google and Palm would like to see the regulators step in and mandate that the rule of commodities should hold. That rule is something like this: users should have the freedom to intermix all components in the entire telephony architecture at will, and all possible points where it is conceivable that a set of features can be considered a component, the dominant player must architect the necessary cleavage points so that it actually is a separate component.
Google would like to have Voice running on the iPhone, so that VoIP could running over the cell data network, thereby commoditizing the underlying phone services offered by Apple and AT&T: basically, making AT&T a “dumb” pipe. Don’t get me wrong: it’s true that AT&T hasn’t done as much as it might have with the iPhone integration. In fact, AT&T has pissed a lot of people of by not getting the basics working perfectly. (I was furious to find out I had to pay an additional $20/mo for text messaging, for example.) But making the case that Apple should let Google Voice on the iPhone because of interesting voice mail features Voice offers is weak sauce. It is a profoundly destabilizing move for Apple and AT&T, and the minimal benefits offered to some set of possible users don’t justify this move. The real argument is commoditization: driving margins down so that the innovators will get a significantly reduced return on the investments they have made in the infrastructure that the others want access to.
Google’s motives are obvious: they are a direct competitor to both Apple (with Android) and AT&T (with Voice). They are a world-beating behemoth, not a tiny start-up that can’t get its innovative iPhone app in the AppStore. Google can afford to invest billions into contriving a marketplace that works in a way that benefits their larger strategic plans, even if they lose millions on an iPhone Google Voice product. They may feel that their planned future would be good for users, but I am certain that it would be good for Google as well. So it is hard to cast Google as an underdog in this dust up.
I even have to work to see Google as one of a group of companies that might do something like this, although Skype on the iPhone is the same issue. The Feds will want to get into this, and the easy play is to push for openness and a level playing field, blah-de-blah. But I don’t see the pieces on the chess board that way: this is a gambit, intended by Google to restructure the marketplace into a mess of commoditized bits where Google’s web unification, limitless computing resources, and millions of miles of black fiber will allow it to dominate, and obsolete the phone companies. Oh, and the handset market, by the way.
Consider Google a Walmart. They seem friendly, they want to sell us goods at lower cost, and will bring new jobs to the community. But ten years later, downtown is dead, the strip malls blight the edge of town, and a family in Tennessee are bazillionaires. It is hard to see Apple as the corner grocer, true. But the anlogy still holds. Apple represents a certain model of use, one that may involve higher costs and an obvious advantage to those established partners with access to Apple’s technologies. Google wants to drastically lower prices so that no one but a Google — who makes money on huge volume — can make real money.
A better case can be made for Palm’s desired open access to iTunes (see Jenna Wortham’s piece in today’s NY Times, for example). iTunes has become the super dominant player in the digital music world, and being blocked could be the end of the company’s hopes. But again, Palm is not trying to build a add-on to iTunes, or something benignly additive, they are going directly at Apple in a war of survival in what was called ‘smartphones’. Now people expect phones to be smart because of iPhone, as a given, so the term ‘smartphone’ is dead.
The Feds might agree with Palm that they — and in principle, everyone — should be able to integrate with iTunes, based on some notion of public benefit derived from the freedom to switch to another handset without losing access to your iTunes managed music. My hunch is that this will come to pass, but I bet graver reservations will slow the Google Voice issue. That is a much more complex case, and it will be hard for Google to keep the focus on the AppStore when its aspirations with Android are well known.
[Update 11:07am ET 4 August 2009: Daring Fireball’s John Gruber seems to agree with me:
Google Voice is a mobile phone service provided by the maker of one of the biggest competitors to the iPhone OS. What if Google Voice were instead Microsoft Voice? And what if Windows Mobile were as modern and competitive as Android? Would you be as surprised then that Apple is discouraging iPhone owners from using the service? Just saying.
