A Blog by Jonathan Low


Jul 19, 2018

Was the EU's Fining Of Google Too Little Too Late?

Google is prepared to battle for years, meaning any eventual settlement could be  strategially and economically irrelevant.

But the major point is that Google is already dominant. Trying to undo the problem is going to be much harder than would have preventing it in the first place. JL

Samuel Gibbs reports in The Guardian:

The Google Play Store is the largest gateway to third-party apps on Android and is an essential part of the Android experience. The consequence is that competing search engines and apps are shut out of the dominant mobile platform, which is what the EC has a problem with.  Maintaining control of Android is essential to Google’s dominance. As with the Microsoft case in 2004, it could take years for the battle to play out. Any eventual remedy could be less likely to open up to the competition. “Any action by the EU is akin to shutting the stable door after the horse has bolted,”
The European commission has fined Google £3.8bn for anti-competitive behaviour regarding its Android mobile operating system. It’s looking to force the company to cede some control, but is it too little too late?
The record fine is not to be dismissed, but for Google it is the EU’s suggested remedy – the prising loose of its tight grip around Android – that may have the largest impact.
The underlying Android operating system used on more than 2bn devices worldwide is open source and therefore free to use as manufacturers see fit. But the Android that most in western markets see is actually a combination of that underlying open source system with services licensed for free from Google.

The problem

The Google Play Store is the largest gateway to third-party apps available on Android and is considered an essential part of the Android experience for mainstream consumers.
The Play Store is free to use under licence from Google, but comes with a set of conditions smartphone manufacturers must meet. The most important of these, and the one the EC has a problem with, is the requirement to set Google as the default search engine and the pre-installation of certain apps, including Google Chrome, YouTube and the Google search app. Google also dictates that some of the pre-installed apps be placed on the homescreen.
Users can delete these apps from their homescreen, choose to change the default search engine and switch out Google’s apps for alternatives, but many do not and are instead drawn to Android because of these services.
Geoff Blaber from analyst firm CCS Insight said: “Although an open source operating system, Android was introduced as a vehicle for Google’s licensable apps and services and to extend the Google business model as engagement shifted to mobile. In this context, Android has been incredibly successful.”
That is the reason it is licensed free to manufacturers, and ultimately the reason devices that cost less than £50 can exist. The more eyeballs the Android-maker can secure on its own products, or Google-fed advertising in third-party apps, the more money it can make from its core business model of selling and displaying ads.
The consequence of this strategy is that competing search engines and apps are effectively shut out of the dominant mobile platform, which is what the EC has a problem with.

The remedy

What the EC is demanding is that Google cede some control over Android in its licensing. The EC is demanding that manufacturers should be free to use Android and include the Google Play Store without having to pre-install the Google Search app and Chrome. It’s a similar strategy to that employed by the EC in 2004, when it forced Microsoft to release a version of Windows without Windows Media Player and later offer a browser choice screen, which allowed users to select a web browser other than Internet Explorer.
But as with the Media Player-free version of Windows, Windows XP N, for which there was no demand, consumers are unlikely to buy a version of Android without Google’s services.
“The EU’s stance is arguably six to eight years too late,” said Blaber. “Android has already helped establish Google apps and services as essentials for consumers in the western world.
“While the separation of apps from the operating system may help foster competition over the longer term, manufacturers will continue to need to offer Google services to be competitive and address consumer demand.”
Richard Windsor from research company Radio Free Mobile said that because users in the EU are so accustomed to using Google services and have come to prefer them “separating Google Play from the rest of Google’s Digital Life services would have very little impact as users would simply download and install them from the store”.
The EC also ordered Google to stop paying smartphone manufacturers and mobile network operators through revenue sharing for exclusively including Google Search on their phones. Finally, Google is also ordered to stop blocking manufacturers from using so-called forked or modified versions of Android, such as Amazon’s Fire OS, if they want to use Google services on their other devices.

The consequences

Google has over the last few years attempted to exert greater control over the Android ecosystem and solve two of its biggest failings. The first is to improve security.
Android smartphone manufacturers have, until recently, been in no hurry to push out updates either for the underlying operating system or security patches, which have become increasingly crucial to safeguarding consumer data.
Google’s efforts to cajole manufacturers has meant that at least a few of the biggest manufacturers have committed to monthly security updates. A weakening of Google’s control over Android would likely result in an eroding of this progress on security and harm consumers.
The second is so-called fragmentation. Due to the lacklustre approach to updates by smartphone manufacturers, there are millions of devices out there with various older versions of Android, which makes ensuring that an app can run on the 2bn-plus devices in the world very hard for developers.
Google has made some progress in nullifying fragmentation through a combination of pressure on manufacturers to update customer devices, the progressive decoupling of essential systems from the underlying operating system into Play Store-updatable services and increased compatibility requirements to license the Play Store in the first place.
“There is a significant danger of unintended consequences that penalises the consumer,” said Blaber. “This ranges from increased fragmentation and greater app inconsistency to increases in hardware cost should Google decide to change or adapt the Android business model.”
Ultimately, Google could end up changing the way it licenses Android, potentially charging for it or limiting access to it, rendering some devices, manufacturers and companies infeasible.
Google will have 90 days to offer potential solutions to the antitrust charges, which will then be reviewed by the EC, but we should expect the Android maker not to take this lying down.
Maintaining control of Android, and therefore the ever increasing shift to mobile, is essential to Google’s continued dominance. As with the Microsoft case in 2004, it could take years for the battle to play out through appeals. Any eventual remedy could come much later than the EU would like, and be less likely to have the desired impact for opening up to the competition.
“Any action by the EU is akin to shutting the stable door after the horse has bolted,” said Blaber.


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