What If the EU Actually Fixed Android? (Premium)

As you may recall, antitrust regulators from the European Union fined Google about $5 billion in July, charging that the online giant has illegally abused its power in the smartphone market. In an analysis of this situation, I compared Google’s case to Microsoft’s earlier antitrust cases, highlighting the ways in which each is similar and dissimilar.

Google has 90 days to respond to the ruling. And it has shown a willingness to make the changes that the EU requires, in sharp contrast to Microsoft’s earlier and more belligerent reaction to its own antitrust cases. That’s smart, given the history of Microsoft’s “lost decade” and that Google’s monopoly power today far exceeds that of Microsoft in its own heyday. Google has so much more to lose.

My initial assessment was that the impact of the EU’s Android case would be “minimal” across device makers, wireless carriers, developers, and users. I described this situation as a “good thing” because the last thing the industry needs is another slow-moving bureaucracy sticking a wrench into the spokes of the wheels of progress. What I was thinking of, at the time, was the silly browser ballot UI that the EU previously required Microsoft to add to Windows.

But now I’m starting to think that the EU case may have a much broader impact on Android. And that the resulting change will still be good for the ecosystem. And could reverse some Google policies that, today, severely limit how companies can bring Android-based products to market.

The key to this thinking is the third of the three types of restrictions that Google has placed in its Android licensing terms: Google prevents hardware makers that want to pre-install Google apps from selling even a single mobile device running on alternative Android versions (or “forks”) that were not approved by Google.

So what does that mean, exactly?

It means that there are two Androids. “Real” Android, which is not free and includes the Google Play Store and a suite of Google apps and services that are both pre-installed on the device and enabled as defaults. And the free Android that Google is so quick to defend itself with, which does not include the Google Play Store or Google apps and services.

No one wants the free version of Android. The near-impossibility of creating a third-party apps store is, alone, the reason we rarely see such devices. As relevant, customers expect and want those Google apps and services. Amazon’s Kindle Fire lineup is the only major example of an Android-based device family that uses this free version. And Amazon isn’t exactly winning accolades for the quality or size of its app store.

So how does this policy impact devices in the real world?

Two major examples come to mind.

First up is Amazon. Like many companies, Amazon doesn’t actually “make” its own portable computing devices. It works with other companies that have this expertise. But because those companies are not allowed to make devices based on the free version of Android and the paid, Google-centric version of Android, it has a very limited list of companies with which it can work. And the quality of Amazon’s Fire HD tablets tells this tale nicely: They both cheap and cheaply made, are based on third-rate hardware platforms that in no way compete with mainstream Android tablets or iPads from a technical perspective.

By preventing Google from restricting how its partners license Android, the EU could help Amazon improve the quality of its Kindle Fire tablets. Amazon is itself very cheap, so it would likely continue selling cheap tablets. But it could also do what it did with the Kindle line of e-readers and offer more compelling, sophisticated, and expensive tablet versions too. This would give consumers more choice. And it would open up Amazon’s software and services ecosystems to more and more lucrative customers.

The other major example is Samsung, a company I feel is actively working to cut Google out of the equation as much as is possible. But thanks to Google’s licensing terms, it must bundle Google’s apps and services on its phones and other devices. So its only recourse is to add duplicate Samsung apps and services to its own devices. And those devices are more complex and confusing as a result.

By preventing Google from restricting how its partners license Android, the EU could help Samsung escape from this trap and create more elegant devices that compete better with those from Apple and a growing list of high-quality Chinese competition. Customers would have a better experience, and those customers that wish to install Google’s apps and services could easily do so.

Put simply, Amazon’s crappy tablets and Samsung’s overly-complicated devices are a direct result of Google abusing its market power and requiring its own partners to work against the best interests of their customers and their own businesses. But if Google makes the concessions that the EU is demanding, these problems both disappear.

And I think it’s going to happen.

Google’s licensing policies were put in place for one major reason: To protect the firm’s core revenue source, advertising, during the transition from desktop to mobile. Early on, Google struggled to squeeze revenues from mobile at a rate that could challenge the more lucrative (but smaller and shrinking) desktop market. But that situation has improved, Android has established itself as the dominant platform on both smartphones and tablets, and consumers actually like and prefer its apps and services.

Making that concession now would not harm Google in any way. But it would benefit the rest of the ecosystem—again, device makers, wireless carriers, developers, and users—quite obviously. It is a sort of win-win, and the EU’s slow-moving antitrust machinery can move on to some other market abuser, secure in the knowledge that it has achieved its goals of leveling the competitive playing field. That it has done so too late to prevent Google from securing its market position is interesting, but also sort of beside the point.