FCC Investigates AT&T-Apple-Google Love Triangle

iTunes TyrannyAn interesting issue has developed in the law of cell phone handsets, and more generally the anti-competitive practices of large national wireless carriers. The issue stems from Apple's refusal to host a Google application in the iPhone App Store. The refusal to host the Google Voice app has not only irritated iPhone users, like myself, but has attracted the attention of the FCC.

 

Google Voice is a unique and useful currently web-based program in development for individuals and small businesses that provides a number of telephone services. Google Voice provides a free local telephone number that forwards incoming calls to the user's other phones, which may be any combination of land and cell lines. The service also includes free domestic calling through a dial in number, similar to a calling card, along with very competitive international long-distance calling rates. Voicemail is also provided along with free automatic transcription transmitted via email and SMS. Free SMS, both incoming and outgoing, are part of the package. The Google Voice app for the iPhone would provide all of these services in one convenient app, eliminating the need to pay for SMS and long distance services through AT&T.

 

Traditionally Google and Apple have had a symbiotic relationship, developing cross compatible technologies, such as the extensive Google apps currently available through the App Store. However, the two have recently become more adversarial, providing directly competing technologies such as smartphones, mobile operating systems, and likely will soon have competing desktop operating systems.

 

To further complicate the issue, Apple, like many other mobile handset manufacturers, has a long standing contract with AT&T to only license the iPhone for the AT&T network. Furthermore, Apple routinely denies submissions to its App Store for content reasons, but now is coming under fire for competition based denials. Beginning to get the picture? Google is offering bargain long distance and phone services that compete with AT&T mobile services, thus Apple excluding the Google Voice app protects AT&T from mobile competition. At this point, several legal issues emerge. Is the Apple-AT&T handset licensing contract an illegal tying agreement? Does Apple's exclusion of the Google Voice app constitute an impermissible exclusionary practice? Latent, is the issue of whether AT&T and Apple are participating on a national scale in some form of illegal tacit collusion, limiting handset compatibility just as the rest of the national carriers do.

 

And it gets even more complicated. Traditionally it is the Department of Justice that handles anti-trust issues like those raised in this case, not the FCC. However, at least at this point, the FCC appears to be fielding the investigation, presumably because wireless communication is involved. The DOJ has investigated and prosecuted similar telecommunications anti-trust issues in the past, including breaking the old AT&T into the "baby bells." Likely the DOJ will become part of this investigation in some way.

 

Yesterday, opening their investigation into the app debacle, the FCC sent out interrogatory letters demanding an explanation from each of the three parties involved: Google, Apple, and AT&T (letters available here). Referenced in the letters were two notice and comment rule-making procedures currently before the FCC, one concerning a wide range of wireless open access issues (RM-11361, more available here), and the other concerning handset exclusivity practices (RM-11497, more available here).

 

Skype was a key player in the RM-11361 issue, petitioning for rule-making on the anti-competitive practices employed by all large U.S. wireless providers. Skype was primarily concerned with networks restricting users' ability to access their Voip service, but a consumer group (The Ad Hoc Public Interest Spectrum Coalition) joined in commenting on a whole range of anti-competitive practices including handset exclusivity and feature crippling. RM-11497 was instituted by the Rural Cellular Association, a trade group representing smaller telecommunications carriers. The petition for rule-making was chiefly concerned with the anti-competitive effect of handset exclusivity agreements, present with all of the national carriers. Again, a key issue in each rule-making is whether the large national wireless networks are tacitly colluding to limit competition.

 

The handset exclusivity issue is not a new issue. In fact, a number of European countries have various laws restricting or banning measures by carriers to lock handsets and reduce functionality. The U.S. government, as of yet, has not jumped on the bandwagon. However, with the ongoing investigation into these anti-competitive practices, Apple and AT&T sure have some explaining to do with their App Store shenanigans.

 

As an interesting side note, the Apple App Store had hosted an unofficial third party interface for Google Voice known as GV Mobile. Sean Kovacs (http://www.seankovacs.com) was the developer, and has a number of interesting developments and insights on the issue posted on his site. At the same time the Google official app was rejected, Kovac's app was taken down. Apparently, an Apple customer service representative responding to a frustrated customer who had just had their program deleted from their phone by Apple claimed that AT&T had requested the deletion. The screenshot above is a copy of the conversation, linked from Kovac's site.

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