Google vs EC

21st April 2016 might end up being a historic date in the world of technology. It's the date when Europe's anti-trust regulator European Commission has sent Google and its parent company Alphabet its Statement of Objection regarding Android. This Statement of Objection has been sent after a year-long investigation into Google's Android that had commenced last year in April 2015.

It's important to note here that a Statement of Objection only means that EC has found Google guilty of abusing its dominant position in Android to ward off competition. The kind of fines and or changes EC will require Google to make still remains unclear. Even if EC does levy any fine on Google or asks it to make any changes, it can be challenged in court. However just for some reference, last time EC set a fine on an American Technology company i.e Microsoft, it was a record $2.2 billion.

According to EC, it has three major issues with Android. EC's Android objections:

1. Protecting its search Monopoly -

Google has a greater than 90% market share as far as general internet search is considered in each of Europe's markets. According to EC, Google allowed manufacturers to install Play Store only if they agreed to pre-install Google Search and set it as the default search service. Google also required manufacturers to pre-install Google Chrome for licensing Play Store or Google Search.

According to EC, the pre-installation of Google Chrome and Google Search being the default search engine helped Google capture most (>90%) of the search queries originating from Android smartphones and dissuaded manufacturers from pre-installing competing search services which ultimately harmed the competition.

2. Discouraging the use of Android forks -

Android forks are a fairly common thing by now. Android being open source, anyone can use the AOSP version of Android and build a custom version of Android with all the modifications they would want. Amazon's Kindle runs on an Android fork. Almost all Chinese smartphones run on an Android fork and so did smartphones like Nokia X1 etc. The thing with Android forks is that even though they can be customized as much as the creator would want to, they can't have Google's GMS license which enables manufacturers to use Google Play Store, Google's proprietary APIs, Google's sync services etc.

According to EC, Google has actively discouraged the use forked Android versions. The EC alleges that forked Android versions can provide an alternate medium for competing apps and services to find their way to consumers but that Google actively discourages manufacturers from using Android forks.

When Android was about to get started, Google formed an Open Handset alliance which was a consortium of 84 firms ranging from handset makers to telecom operators to chip manufacturers. While getting approval for GMS license from Google without being part of OHA is possible, the trick is that OHA members are in a contractual obligation with Google. According to this obligation, OHA members are prevented from selling Android devices running on an Android fork, if they do so they'll never be able to obtain a GMS license from Google ever again. The OHA has basically all of the top global smartphone companies as its members.

So if someone like Samsung or Motorola decides to ship a smartphone running on a fork version of Android, they'll never be able to ship an Android device with Google services. This has meant that most global manufacturers have almost always shipped smartphones complying with GMS wherever possible, with the exception of countries like China etc where Googler services are by default blocked.

3. Financial incentive -

The EC also alleges that in exchange for keeping Google Search as the exclusive Search engine in Android smartphones, Google offered manufacturers and telecom carriers some money. This money would most probably be a cut from the advertising and search revenue Google generates from Android and Google made a whopping $31 billion in revenue from Android.

I have outlined all of EC's concerns. Again this is just a statement of objection and no fine has been levied to Google nor has it been asked to make any changes to the way Android functions. Financial fines aside, it's interesting to think of what changes EC can ask Google to make. According to me, these are the possible changes EC can ask Google to make, part of which or maybe all of which maybe applied.

1. Stop bundling of apps together, give manufacturers the ability to handpick the Google apps and services they would want to make use of. 

2. Become more liberal towards fork Android and allow manufacturers to sell both GMS based versions of Android as well forked Android.

3. Stop providing any financial incentive to manufacturers to exclusively use Google Search or other Google apps.

So if all the above-proposed changes are applied, what would be the effect on Android for Google ? Would it drastically alter how Google makes money off of Android or would it remain largely unchanged ? The answer is that it's not gonna change anything for the most part for the following reasons - 

* Market saturation -

Its little wonder now that the smartphone market in developed markets has peaked. Smartphone unit growth across Western Europe saw a rise of around 3pc year-on-year during the Q3 2015, with the French market slowing to 5pc growth and the UK declining by 1pc, according to a report by GfK, which is based on consumer 'point-of-sale' data for Q3 2015.

Growth was marginally higher in Eastern Europe at 4pc. Given that this is a saturated smartphone market, most of the additional smartphone sales will be for people who are buying a smartphone for the second time instead of the first time. This means that most people have already been accustomed to various Google services by now. Even if I am to assume that a ruling from EC allows manufacturers to selectively install Google services which they prefer and manufacturers install just the Play Store and Google Play Services, it's not difficult to see the users entering the Play Store or whatever app store there is and downloading the Google apps such as Maps, Gmail, Search, Photos etc which they have become accustomed to.

After all, Europe is going to be a market where newer devices being sold are gonna be replacement devices. Users in Europe by now who would have extensively used Gmail, Maps or whatever favorite Google services they have used would be willing to download them again in case their smartphones come pre-installed with some other apps. The point I'm trying to drive here is that by now most users have a particular set of apps that they see as vital and are comfortable using on a daily basis, replacing those apps and using something else that came pre-installed isn't gonna be easier than just downloading the good old Google apps again. 

*Thriving on quality, not pre-installation -

Most Google apps that are popular today i.e the ones that have more than a billion downloads have so largely because they are the best in the market right now and not because they came pre-installed. There are only seven Google products that have managed to have more than a billion users. These seven products are Maps, Gmail, Android, Chrome, Youtube, Search,  and Google Play Store.

Out of the above-mentioned products only five are apps i.e Maps, Gmail, Youtube, Chrome, and Search. All these five are almost undisputable in their respective categories. As far as consumer-facing maps are concerned, there are hardly any maps as detailed and as expansive as Google Maps. As far as video is concerned, hardly does any other video company manage to have the same amount of content that Youtube holds. Gmail is the most used email platform. Chrome is synonymous with web browsers, even on PCs where Chrome isn't pre-installed it has managed to overtake Internet Explorer. Google Search is the gold standard for search.

I am saying that Google apps have thrived on Android because of their quality as not all pre-installed Android apps have done well. Google + is nowhere near what Facebook is today. Google Play Music isn't as big as Spotify. If pre-installing apps would have made every Google app successful then even Google + and Google Play Music should have been astounding successes but that isn't the case. In fact, Facebook and Spotify that lead the pack aren't even pre-installed in most smartphones and users have manually downloaded them to their smartphones.

*The power of default -

Some might point towards Apple and tell how the power of default has helped Apple soar the usage of Apple maps or growth hack the number of Apple music customers in a short span of time. While correct, the key distinction between iOS and Android is that iOS doesn't allow you to change your default app whereas Android does.

So for example in the case of iOS, if you receive a destination on Whatsapp or on Mail, it will by default open on Apple Maps, it's from Apple Maps that one would have to re-enter the destination in Google Maps which is too much of a hassle. Android, on the other hand, allows people to set or change their default apps.

The only way this changes is if some manufacturer doesn't pre-load Google apps nor lets users change their default apps. In such a case I believe its the manufacturer who would lose. As one manufacturer's resistance to not allowing change of defaults would become the strength of another manufacturer as Android is available to all.

* A little to late ? 

The smartphone market has largely peaked in developed markets like Europe for the very least. By the time these reforms come into effect, if they ever will, the battle would have already changed. Currently, the focus is on VR, bots, voice assistants like Alexa etc as the next big computing platform.

Innovation in the smartphone market has peaked for the most part both in terms of hardware and software. All users by now have a definitive intent as to how they're gonna use their smartphones and with the help of which apps and services, being able to change that with brute force might not result in many changes as despite all of Google's efforts to safeguard Android, they're thriving on Android because of their quality and not the safeguard efforts in place.