A $5 Billion Fine Will Not End Google’s Stranglehold on Smartphone Software

In order to license Android, phone manufacturers are subject to a rigid set of requirements meant to drive mobile search traffic to Google.

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Jul 18 2018, 2:20pm

Image: Getty

On Wednesday morning, the European Commission fined Google 4.34 billion euros ($5.04 billion USD) in a landmark antitrust case against its Android licensing practices. The European Union regulatory body said that Google has been imposing illegal restrictions on phone manufacturers since 2011 in order to “cement its dominant position in general internet search.”

This is the second fine the Commission filed against the search giant in the past year. In June 2017, Google was fined $2.7 billion for breaking antitrust laws related to its leveraging its dominant position as a search engine to privilege its own shopping service over its competitors, “irrespective of [their] merits.”

Android is technically an open source operating system, which means any phone manufacturer can install it on their mobile devices for free. But if the manufacturer wants to include all the Google services that most people expect from Android, such as Maps, Gmail, and the Play Store, they have to sign a licensing agreement with the search giant. This licensing agreement requires the manufacturer to pre-install certain apps, including Google’s search engine, Play Store, and internet browser, Chrome.

As I recently found out during an experiment to leave the “Big Five” tech companies for a month—Amazon, Apple, Microsoft, Facebook, and Google—it’s next to impossible to find a smartphone that isn’t using some version of Google’s software. Pretty much the only game in town is an indie OS called Sailfish, but this can be notoriously difficult to get onto US phones, which are generally locked down by mobile carriers to prevent modifications to the operating system. When I bought a new phone for the experiment, the first thing the staff representative asked was whether I wanted to link all my Google accounts to the device—it seemed impossible to escape.

A whopping 86 percent of all the smartphones sold use Android, and almost all of these phones came loaded with Google’s apps.

Even if you have a phone that running a version of Android that didn’t come with any of the Google apps pre-installed, it’s becoming increasingly difficult to install these Google apps after the fact. In March, Google started blocking users from logging into its apps on Android devices that haven’t been licensed by Google. This further increased the company’s control over its nominally open source operating system by punishing those who use an Android fork, rather than the company’s official version.

This restriction was justified by Google on the grounds that alternative versions of Android, or forks, would fragment the app ecosystem because developers would create apps that were incompatible across Android devices. The European Commission rejected this excuse since there was no reason that Google couldn’t check that forks met the technical requirements needed to run Google apps and didn’t provide any evidence that forks would fail to support apps.

The European Commission also cited Google for making payments to “certain large manufacturers and mobile network operators” on the condition that they exclusively installed Google on their devices. The practice of paying manufacturers mostly occurred between 2011 and 2013, the year the Commission started looking into the current antitrust case. According to the Commission’s report, this practice “effectively ceased” in 2014.

The purpose of Google’s anti-competitive tactics in the smartphone market is to drive users to it’s real moneymaker: the search engine. Google makes almost all of its revenue by collecting massive amounts of user data and using this data to sell targeted ads. This is why it can give away Android away to mobile manufacturers for free. These ‘products’ are just means to an end, which is getting the phone users to enter their search queries on Google.

This tactic is incredibly effective. Although users are free to remove Google apps from their devices or opt to use different search apps, research by the European Commission found that most users don’t do this in practice. In 2016, for example, the Commission found that 95 percent of search queries made on Android devices that had come with Google apps pre-installed made their searches through Google. Compare this to the Windows phone, which didn’t come with Google apps pre-installed, and only saw 25 percent of search terms routed through Google. All the other searchers were through the phone’s default search app, Bing.

Google’s scorched earth policy when it comes to mobile devices makes it nearly impossible for alternative mobile operating systems to enter the market. Even relatively large companies like Amazon, Microsoft, and Mozilla have tried and failed to develop a mobile operating system that can compete with Android. The results speak for themselves. Today, 99.9 percent of all smartphones run iOS or Android, but the lionshare of the mobile market belongs to Google. A whopping 86 percent of all the smartphones sold in the world use Android, and most of these phones came preloaded with Google’s apps.

According to the European Commission’s decision to fine Google, the competition from Apple “does not sufficiently restrain Google” because the two are basically operating in different spheres. Apple’s phones are vertically integrated— the hardware and OS are both produced by the same company— and its OS can’t be licensed. Android, on the other hand, can be found on a staggering variety of different phones. Since consumers make purchasing decisions based on many other factors other than a phone’s operating system, so forcing all the different phone manufacturers to place Google front and center on their devices totally limits customer choice.

Read More: Why I’m Quitting Google, Amazon, Facebook, Microsoft and Apple for a Month

“Even if end users were to switch from Android to Apple devices, this would have limited impact on Google’s core business,” the European Commission noted. “That’s because Google Search is set as the default search engine on Apple devices and Apple users are therefore likely to continue using Google Search for their queries.”

In this respect, the European Commission’s antitrust case is a major victory for European consumers, who will now have greater freedom of choice when it comes to purchasing devices that are more than just Google machines. The Commission hopes that opening up the European mobile space for alternative search services and applications will lead to further innovation in a market that has been defined by the iOS-Android duopoly for nearly a decade.

The European Union’s seven year investigation into antitrust violations is a refreshing departure from the American political system, which has been systematically dismantling the regulatory infrastructure meant to prevent monopolistic business practices over the last few years. The Commission’s ruling is a step in the right direction, but doesn’t change the fact that Google’s Android still dominates the mobile OS space and will continue to do so for the foreseeable future.