Android's Uncertain Future
Written by Sue Gee   
Thursday, 19 July 2018

We were already concerned about the impact on the future of Android of the still ongoing Oracle v Google lawsuit. Now Google has been fined €4.3 billion ($5 billion) by the European Commission for breaking its antitrust regulation and If it doesn't comply with the EU's strictures within 90 days, it will face a daily fine of $15 million.  Can Android emerge unscathed? 

This isn't the first fine levied on Google by the European Commission. Last year it ordered Google to pay €2.42 billion for abusing its dominance as a search engine by giving an illegal advantage to Google's own comparison shopping service. In another ongoing case regarding website advertising, the Commission's preliminary conclusion that Google has abused its dominant position. Neither of these directly target Android, which is what makes the latest decision so concerning.

The EU's verdict was announced by tweet by EU Commissioner, Magrethe Vestager, who seems to have been the driving force in the vendetta against Google. 

mvestager

The three illegal restrictions she refers to are that Google: 

  • has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store)

  • made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices

  • has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called "Android forks")

euantitrust

 

According to the European Commission press release these contractual restrictions:

have enabled Google to use Android as a vehicle to cement the dominance of its search engine. 

The fine levied by the EC has been calculated on the basis of the value of Google's revenue from search advertising services on Android devices in the EEA. 

Google now has to desist from these practices within 90 days and if it does not it will be:

liable for non-compliance payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company.

In his response, in a blog post, Sundar Pichai makes the very valid point that in making a decision on the grounds of Google's anti-competitiveness, it ignores the competition Google's Android faces from Apple's iOS phones. In fact the EC's position is even more twisted. The EC argues that Apple devices are typically priced higher than Android devices and may therefore not be accessible to a large part of the Android device user base  and that Android device users face switching costs when switching to Apple devices, such as losing their apps, data and contacts, and having to learn how to use a new operating system and so are deterred from switching.

It does seem that whatever arguments Google could come up with to  suggest that Android users can exercise choice - such as having 1,300 brands powered by Andriod with 24,000 different devices and device owners being able to remove preloaded apps and replace them, this will not mollify Magrethe Vestager.

blog post on euractiv.com, published last week before the EC made its decision by Žiga Turk, a professor at the University of Ljubljana, Slovenia, outlines a really good argument why Android's current business model should not be be penalized: 

But it is the free and open-sourced Android that creates a competitive environment for hardware manufacturers. It creates a competitive environment for app developers. It created a challenger and an alternative to a closed, proprietary and vertically integrated business of Apple.

This all drove down prices and made smart mobile computing available to the masses. Besides, installing alternatives to Google apps is a few taps away and can always be done.

To slightly improve the competition of three apps, the Commission wants to kill the business model that created a competitive market for smartphone hardware and software in the first place and that allowed also European startups to compete in the previously Apple-dominated market.

So Android's profitability is now threatened by a vindictive Oracle on one front and a European Commission intent on squeezing it hard on the other.  What impact is this going to have on Android

Sundar Pichai's blog post suggests that it could mean Android might no longer be available for free. He explains that while Android has always been made available to phone makers and mobile network operators without charge, Google has invested billions of dollars over the last decade to make Android what it is today. It has made this investment in order to earn a revenue from having its apps installed and from users choosing Google's apps in preference to those from rivals and states the conclusion  that:

The free distribution of the Android platform, and of Google’s suite of applications, is not only efficient for phone makers and operators—it’s of huge benefit for developers and consumers. 

He continues:

But we are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms.  

Rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition and Android has enabled all of them. Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less. We intend to appeal. 

As Google has discovered with the Oracle lawsuit, appealing is an exhausting and debilitating process and if it were to lose both and have to pay the $8.8 billion demanded by Oracle back in 2010, or even more to take account of the passage of time, plus $5 billion, or even more, it might be that charging for the Android operating system might not be enough to justify its ongoing investment.

Much of the Internet is built on the idea of giving things away for free and then "monetizing" the situation by gaining information, showing ads, or providing in-app purchasing of extras. Google needs to fund the development of Android somehow and if it can't put its own search and browser first then how is it to be funded?

Google may not be the "do no evil" corporation of a few years ago, but this doesn't mean it always does evil.  

 androidEU

 

More Information

European Commission press release

Sundar Pichai's blog post

 

Related Articles

Appeals Court Rules In Favor of Oracle

 

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Last Updated ( Thursday, 19 July 2018 )