Tuesday, April 19, 2022

Mobile app markets: Apple seeks to defend the status quo and to defang procompetitive measures -- instead, it should finally start to DEFINE the future

This post is about a simple--though immensely important--question. It's a question that Apple should think about again. Let me quote JFK on this occasion:

"Change is the law of life. And those who look only to the past or present are certain to miss the future."

Is Apple making a mistake in that regard? Is it missing an opportunity?

Apple has a glorious past and an even more glorious present. And it's not going to get into serious trouble in the foreseeable future--looking at that mountain of cash and customer loyalty. Still, it may be missing an opportunity for a better future because it focuses--almost myopically--on the nearest term.

Change is not just the law of life as JFK put it, but change is coming to iOS. Apple's leadership may view it otherwise, but neither is it acceptable for a mobile OS duopoly to tax almost the entire software industry nor is it practical for a single company to be the censorship rulemaker and Judge Dredd (judge and executioner) of app reviews. If an app doesn't violate a country's laws, it must be available on iOS, "sí o sí" to put it in Spanish.

The Dark Age for ISVs (independent software developers, i.e., the ones who depend on platforms) is coming to an end. There is light at the end of the tunnel in the form of the Open App Markets Act (OAMA) in the U.S. and/or the Digital Markets Act (DMA) in the EU. And Apple largely owes it to a district judge who erred to an unbelievable extent on the law, the economics, and the technology that it didn't lose the first round against Epic Games.

I'm neither an Apple "fanboi"--I remigrated to Android last year though it cost me a weekend (as I more or less expected)--nor an Apple hater. In my previous post I explained that I'm closer to Apple's views on Section 1 of the Sherman Act. I may have been the only independent commentator out there to give Apple more than just the benefit of the doubt with respect to the enforcement of that Dutch antitrust ruling. And I've been insulted by a number of people for explaining the narrow scope of the consolation-prize injunction Epic won under California Unfair Competition Law (and for predicting that Apple would get that one stayed). Of course, I don't have a patent or other kind of monopoly on balance. I wish to particularly highlight that John Gruber of Daring Fireball, while generally very sympathetic to Apple, doesn't unconditionally defend each and every App Store policy or related decision. John probably surprised some people, and I admit that would include me.

From my vantage point (as an Apple critic and anti-App-Store complainant who is nevertheless trying to stay rational), the developments around mobile app distribution have reached a point at which Apple needs to think it over, needs to reprioritize. We could have reached that point sooner, and after the Epic Games v. Apple trial I thought we were getting there sooner. Be that as it may, recent developments suggest that now--at long last--a certain tipping point has been, or is about to be, reached.

If Apple doesn't alter course now, it may find it much harder or even impossible later to play a more constructive role and shape the regulatory future.

About a week ago, a deeply entrenched Tim Cook delivered what was rhetorically and strategically the perfect speech. Speaking at a meeting of the International Association of Privacy Professionals, he stressed why for the sake of privacy--and, which is obviously related, security--the App Store monopoly should not be broken. It's fairly possible that no tech industry executive ever performed like this as a salesman and as a politician at the same time. It was like he was a frontrunner for the presidency. But it's not simply about whether he does things right. It's mostly about whether he does the right thing going forward from here on out.

The reactions to that speech--not in that conference room but beyond--must give Apple pause. Apple should recognize that the solution is not to defend the status quo, which is unsustainable, and to try to defang procompetitive measures, which merely delays the inevitable. Instead, Apple should open up and take the lead in defining a future in which privacy and security will not be--as they never have been--antithetical to competition in software distribution.

By coincidence, all three "de" words match the following pattern: def?n?.

Apple, you know that you are on the wrong track when your CEO gives his very best, but a journalist (the Intercept's Sam Biddle) sardonically dismisses your argument:

Just one journalist? I saw more such tweets, also from app developers, but what's even more important is how the powers that be reacted. Newsmax quotes a joint statement by Senators Richard Blumenthal (D-Conn.) and Marsha Blackburn (R-Tenn.):

"Tim Cook seems terrified of increased competition, and Apple does not want Americans to have the option to circumvent their App Store monopoly.

"We fully agree with the need for comprehensive privacy legislation and have been actively discussing this with our colleagues on both sides of the aisle. However, it misses the mark to say we can't have both consumer privacy and competition in the app marketplace.

"As passed by the Senate Judiciary Committee, the Open App Markets Act acknowledges this balance. Suggesting otherwise is a scare tactic to justify closing markets off to competition."

Contrary to what Apple has been claiming so far, there are ways to reconcile competition in app distribution with security and privacy concerns. Describing security and privacy as mutually exclusive with open app markets cannot be in Apple's long-term interest. It will still want to emphasize privacy (and security) even after the change that is coming. Why dig an ever deeper hole that just becomes harder to get out of?

No matter how harshly I've criticized and how vigorously I've defended Apple on different occasions, I've always been consistent in recognizing Apple's desire to be different. To think different. To be unique. That includes IPR enforcement (though it doesn't mean I necessarily supported overreaching remedies such as a disgorgement of total profits over a rounder-corners-and-bezel type of design patent).

I even respect that uniqueness and consider it a good thing for competition and innovation when it involves issues I personally don't rate all that highly. For example, when I installed a new HP Notebook with Windows 11 last week, I was prompted to decide whether I'd let advertising networks identify me across apps. Without hesitation, I gave that permission. That's not because of solidarity with others who need to advertise or sell advertising inventory in apps (I've done both), but simply because--as that Windows prompt accurately explained--I'll get to see more relevant ads. Now, there are many people who'd rather see totally irrelevant ads than allow the smallest amount of tracking, and I respect that view. There's this famous quote, falsely attributed to Voltaire instead of biographer Evelyn Beatrice Hall: "I disagree with what you say, but I will defend to the death your right to say it." I'm not going to die for this principle, but those who have such strong views on privacy should be able to get what they want.

I outlined a licensing policy last year that would reconcile Apple's privacy philosophy with competition in app distribution. I'm sure that many of those who want to open up mobile app markets wouldn't like my idea. They'd argue that this would still give Apple too much power, that it would make it too hard for third-party app stores to compete with Apple. I have no problem with not finding anyone who agrees with that idea (without Apple it wouldn't fly anyway). It's just one example of what could be done to give customers the best of both worlds.

Instead of opening up, Apple doubles down on a strategy that clearly fails to persuade. It should be beneath Apple to engage in astroturfing, whether it's about standard-essential patents or about app stores. But the latest is that some notorious "Apploturfers" claim that opening up app distribution would be a boon to Facebook, a bogeyman that Apple probably views as its archenemy in the "data-industrial complex" Tim Cook was talking about. President Eisenhower warned against the "military-industrial complex" in his farewell address. Tim Cook still has miles to go, and I wish his legacy would include a solution that squares Apple's privacy philosophy with open app markets.

If done right, that would create and not destroy shareholder value. The risk Apple is taking with its current all-or-nothing approach is to lose control it won't be able to regain anytime soon. Microsoft avoided that risk by being cooperative at just the right moment. And Microsoft itself might never have become what it is if another company--IBM--hadn't allowed third-party PCs based on its architecture because of its history of antitrust problems with its mainframe. Apple uniquely appears to remain defiant forever and isn't convincing anyone anymore, not even with world-class campaign speeches--other than a judge who thinks there are multiple "operating systems" for the App Store and that mobile game transactions aren't necessarily digital...

A year ago, I thought that maybe Apple had no other choice for shareholder value reasons but to defend its monopoly. With all that has happened since, I view it differently.

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