Technical hitches with the iPhone 4 are not Apple’s only headaches of late. It is facing pressures in Europe and China – both key markets as its US heartland saturates and it needs strong performance on a global basis. Pending EU legislation could force Apple to change its software policies, and EU Commissioner Neelie Kroes may also launch a probe into interoperability between various smartphone platforms, including iPhone.
Kroes has already fined Microsoft $1.4Bn for lack of software openness, and is now focusing on whether smartphone vendors comply with new European interoperability rules. Kroes specifically named Apple’s App Store as an example of a closed environment.
The comments come against the background of a massive EU initiative called the Digital Agenda, which among many items aims to redefine the ways in which companies can fall foul of antitrust rules. When considering abuse of a market position, the Agenda wants to change the standard from ‘dominant’ to ‘significant’ place in a sector. The document states: “Since not all pervasive technologies are based on standards the benefits of interoperability risk being lost in such areas. The Commission will examine the feasibility of measures that could lead significant market players to license interoperability information while at the same time promoting innovation and competition.”
Kroes explained: “We need to make sure that significant market players cannot just choose to deny interoperability with their product. This is particularly important in cases where standards don’t exist. This is not just about Microsoft or any big company like Apple, IBM or Intel. The main challenge is that consumers need choice when it comes to software or hardware products.” Under these rules, Apple could face investigation into its barring of third party development suites, such as Adobe Flash, an issue already reportedly being examined by the US Fair Trade Commission.
Some analysts believed that Apple could be forced to allow developers to write apps without using Xcode or going through the vendor’s approval process but Apple may have beaten the regulator to the punch with announcements last week. In a surprising, but tactical move, Apple relaxed its ban on developers using cross-platform tools to produce iPhone applications, allowing Adobe Flash a look-in, and removing the ban on rival mobile advertising platforms such as Google’s AdMob service.
For Jobs it may be like jousting but he should not underestimate the might of his adversary. Whether intentional or not, Apple had given itself considerable space to control its own environment and establish its own mobile advertising service free from marauding outsiders. It may have been a bold gamble and the late relaxation of restrictions may be seen purely as a means of placating battle-ready regulators that seemed to be lining Apple up for a king-hit.
Mr Jobs had better hope the latter does not apply because the result could seriously dent Apple’s stellar financial results. The case also highlights the inconsistency of regulation, particularly in Europe, where ‘white knights’ are constantly targeted and smaller, less lucrative infringers, often overlooked. It begs the question, who regulates the regulators?