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Is Android a monopoly?

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A report from Bloomberg this morning suggests that US antitrust regulators are looking into whether Google has engaged in anticompetitive practices with its Android operating system. It seems a preposterous question to ask, but might Android constitute an actual monopoly?

Google doesn’t make any phones, and it doesn’t force Android on anyone — phone makers choose to ship devices with that software on board. Google also isn’t fully in control of Android, as evidenced by the hundreds of millions of Android smartphones being sold in China without Google’s apps or blessing. Android is famed as the open-source alternative to Apple’s closed iOS, and the two are locked in a healthy and balanced competition in the United States, with Google’s software claiming 59 percent of the market and Apple taking 38 percent. From a consumer perspective, it’s a fair fight with no monopoly in sight.

The main thing that Google has any say over is which devices get to carry its Google apps and services. And if that’s a monopoly, then it seems like a just one: if you invest the time and money to develop sophisticated apps like Gmail, Chrome, Maps, and YouTube, then you should have the right to decide who gets to use them. Things grow more interesting, however, when you consider Google’s most important app of all: the Play Store. It is the portal through which the vast majority of Android apps are obtained, and it’s the only viable competitor to Apple’s App Store.

For most people, Android without the Play Store is essentially not Android

From the consumer’s perspective, Android commands 59 percent of the US smartphone market, but as far as smartphone manufacturers are concerned, that number might as well be 100 percent. Because Apple doesn’t share access to its treasure trove of apps, and because Windows Phone doesn’t have a competitive selection, the only route open to any potential iPhone competitor is to go with Google and the Play Store. The Nextbit Robin "cloud smartphone," which is being built by a group of high-profile designers and engineers, is opting for Android. The Obi Worldphone, which is backed by former Apple CEO John Sculley, is opting for Android. And so is every global smartphone maker not named Apple or Microsoft.

There are currently just three options for any smartphone company without its own operating system. The option Google would like everyone to choose is Android with the Play Store and Google Play Services, which are increasingly integrating more and more of the core Android functionality. That comes with a measure of Google’s influence, but is generally preferable to option number two: a stripped-down Android without an app ecosystem and deprived of Google’s latest security updates. Anyone familiar with the US (or European, for that matter) smartphone market will instinctively know that Android without the Play Store is essentially not Android for the majority of consumers. Windows Phone, soon to become simply Windows 10, is the distant third option, though no one outside of Microsoft is convinced by it yet. That’s how we arrive at a situation where the choice for manufacturers is practically nil: if you want to break into the US smartphone market, you go with Android and rely on the Play Store to flesh out your software proposition.

Directing without giving explicit directives

This is Google’s soft power monopoly. The Mountain View company doesn’t need to own any phone vendors to have effective influence over them. That's why it was comfortable with selling Motorola last year, in a move that also convinced Samsung to toe the line and rein in its Android skin customizations. Any company that wants to deploy Google Play Services on its devices is more than welcome to do so, but the price Google charges for that privilege is a loss of sovereignty. Google wanted to have a "Powered by Android" graphic featured in every Android smartphone’s boot-up animation, and it got it. It wanted simpler, less ornamental skins from phone makers, and it’s getting them.

The problem with monopoly power, however, is that it opens the door to abuses. So far, the demands that Google has imposed upon its hardware partners appear to have been beneficial for the consumer. Google asked OEMs to cut the crapware and adhere to a more uniform and user-friendly experience. It has also encouraged them to dispense with their own browsers in favor of Chrome, which has made it easier for users to sync their Android phones up with the rest of their connected Google lives. And Google still allows room for some carrier apps and even Microsoft’s software, which recently started shipping on Sony, Samsung, and Dell Android devices. But being a benign monopolist doesn’t make you any less of a threat to the proper, competitive operation of a market.

The choice is between potential success with Google and sure failure anywhere else

We already know the market for smartphone operating systems in the US starts and ends with the Google-approved version of Android infused with Play Services. That one’s essentially a lost cause (unless and until Windows 10 proves itself as a viable mobile alternative) — but the dominant position that Google enjoys there may also be affecting the balance of power in the apps realm. That’s the thing troubling authorities now, both in the US and across the ocean in Europe, where the market dynamics are very similar.

Without competitive app stores of their own, Sony, LG, Motorola, and all other Android phone makers in Europe and the US have no reasonable alternative but to accede to Google’s dictates, whatever they may be. They technically still have a choice — these companies are coming to Google rather than the other way around — but it’s only a choice between a potential Google-driven success and a certain, ignominious failure with any other OS.

The European Commission is currently investigating "whether Google has illegally hindered the development and market access of rival mobile apps or services by requiring or incentivizing smartphone and tablet manufacturers to exclusively pre-install Google’s own apps or services." Another line of the inquiry is concerned with whether Google has improperly bundled its apps and services in order to, again, prevent proper competition from potential challengers. These are likely to be the areas of highest interest for the alleged US investigation as well.

Sometimes, even the virtuous do villainous things

It’s difficult to think of Google as any sort of a monopoly power, because it just doesn’t fit the standard mold. The company line about empowering the next billion connected humans is a heartwarming one, and its longstanding reputation as a scrappy web upstart endures despite it now pulling in tens of billions of dollars in revenue every quarter. There’s also a touch of irony in Google’s openness to doing business with other companies now exposing it to suspicions of anticompetitive behavior — Apple and Facebook are also enjoying dominant positions, but the fact they’re more stringently walled off and guarded actually works in their favor. Still, the truth is that Google is now one of those enormous monoliths — even after the Alphabet split decoupled it from some of the longer-term, experimental projects on its books — whose very size can imbalance markets and degrade competition.

Google doesn’t hold a monopoly over the entire smartphone market, and it doesn’t have the same level of influence globally. But in the two areas where its Android operations have aroused regulatory scrutiny, the United States and Europe, Google enjoys a practical stranglehold over the mobile operating system market — thanks to Apple’s non-participation and Microsoft’s chronic failure to compete. It’s arguable that other tech giants, such as Apple and Amazon, are better subjects for antitrust investigations, but US and European authorities are right to at least consider the circumstances of Google’s relationship with its hardware partners.

It's clear that Google is in a dominant position. It's less clear how that can possibly be remedied when the company is giving away its software for free and under terms that everyone seems to find advantageous. Google is guilty of making software people and companies want. Now what?