The mobile OS bubble

Much has been said about the filter bubble, how tailor-made search results are affecting how we see the world. The filter bubble is created not by sheer oligopoly, but rather algorithms which are used by most web shops, search engines and sites that have more advanced search functions.

A slightly more traditional expression of oligopoly is that of the mobile market.  Android phones and Apple Iphones account for over 90 % of all mobile shipments and that Facebook and Google together account for about 60 percent of the global mobile ad market, numbers which are likely to grow (the newest figures indicate that Android and Iphone devices account for 96 % of all new shipments).

Worldwide smartphone sales to end users by operating system in 2013
Android 79.0%
iOS 14.2%
Windows Phone 3%
BlackBerry 2.7%
Other 0.9%
Mobile OS Market Share as of 2nd quarter 2013 Gartner[15]
Mobile operating system browsing statistics on Net Applications
iOS 52.96%
Android 36.14%
Java ME 4.44%
Symbian 3.50%
BlackBerry 1.42%
Kindle 0.93%
Windows Phone 0.45%
Other 0.16%
Mobile OS Market Share as of February 2014[update] Net Applications[1]

Tables provided by Wikipedia

Dominance in the ICT sector is of course nothing new. Microsoft Windows obviously dominated the PC market for years, but access to programmes was not dictated by Microsoft as such, although it was all but self-evident that for software to be successful, it hade to be made for the Windows OS.

On smartphones, however, the OS largely determines what applications one uses as well. The OS comes with a lot of nifty pre-installed apps, often provided either by the maker of the OS or the actual smartphone.

On Android devices, almost all services are connected to the user’s Google account. Google Now is the next logical step: an application which combines information from all sources, creating a reactive (and proactive) application, which changes according to the individual needs of its users. It is not all-too inconceivable that Google will eventually try to replace existing apps with Google Now features.

Windows came with a lot of programmes as well, of course, and so one could say that the main difference is that the mobile apps tend to be a bit more usable. But this is beside the point.

The point is that the software ecosystem on mobile platforms is built around app market places, and not the actual technical platforms (as was the case with Windows). These market places are owned by the OS providers, who also charge a 30 % commission for every app installed. By providing these market places, the OS provider guarantees the quality of the product, at least to some extent, since apps have to be approved. However, the apps may gather whatever data they like to whatever purposes they like, and this is nothing the  OS providers care about, as long as the apps themselves don’t contain malware. But who needs malware when an app can gather data on where you’re located, what you search, who you call and who you’re with?

At the same time, however, this also means that the makers of the most popular mobile OS also determine which products can enter the market and how they will succeed – “staff picks”, for example, are bound to be successful. Although it is possible to create independent apps without going to the app market places, it is actively discouraged by the OS and it is also extremely difficult to make money of an app outside the market place ecosystem. This would perhaps not be so worrying, were it not for the fact that access to the global mobile software market is dominated by two single companies. This means a much larger concentration of capital than in the Microsoft days.

See when did Apple’s bank account start to grow? 2008. What else happened in 2008? The App Store opened. Apple assets

Source: asymco

And what else happened in 2008? The Android Market opened. Google’s assets have gone from $32 bn to $111 bn since then. Although the Android Market’s successor Google Play remains less profitable than the App Store, Google is also dominant in the mobile ad sector. So not only does Google determine which apps we use, but also the ads we see.

 

Not so neutral net neutrality?

Finnish MEP candidate Otso Kivekäs from the Greens recently compared the internet to road infrastructure. In his analogy, he said that removing net neutrality would be like allowing “the company that builds the highways to put different speed limits on different car brands: Audis could drive 100 [km/h] and all others 60 [km/h]. And everybody would pay the toll.”

If ISPs could discriminate as they wished and simply adjust the speed of different services, either according to the highest bidder or simply because of their own preferences (goodbye, Skype), this would surely be a great injustice to all internet users. A removal of net neutrality left completely unregulated is not ideal, to say the least. But let’s look at it from another perspective.

Wonder why Netflix, Google and Apple are such great supporters of this “consumer right”? Because 30 % of US internet traffic is used by Netflix, 15 % by YouTube and 2 % by iTunes, according to a study by Sandivine.  Still, these companies pay nothing for the infrastructure yet benefit from it immensely. It is not difficult to see why ISPs would seek to receive compensation from the two companies that use half of all bandwidth.

Sandivine: internet traffic statistics

Netflix and YouTube obviously top the charts because they are immensely popular services and because video uses a lot of data, especially full HD.

Now, using the road analogy once more, this is essentially a case where two companies fill up all the roads with their trucks and continue to be treated like regular commuters on their way to work.

An article from Financial Times also addressed this issue, and according to the editor, “net neutrality no longer works.”  FT applauded the FCC’s decision, expressing that “if customers are willing to pay more for a premium service, as they do with mobile phone contracts or business class travel, then they ought to have the right to do so.”

Business class travel is hardly a good analogy, as people already pay for faster internet subscriptions. Rather, one could take the road analogy one step further. There are a lot of rules which already dictate traffic in order to make it more effective: bike lanes, bus lanes, toll discounts for car pools, the obligation to give way to trams and so on.

What if internet traffic that serves the public interest could be given right of way? Setting aside the difficulty of defining the public interest for a moment, one could think of at least access to public documents and services to begin with. Services that eat up a disproportionate amount of all bandwidth (read: Netflix and YouTube), on the other hand, could then be “taxed” for their  excessive bandwidth use, a fee which would be earmarked for investment in new broadband infrastructure. Now, this might not be what the FCC (or FT) had in mind, but it is a conceivable alternative to net neutrality as we think of it today. Doesn’t positive net discrimination have a nice ring to it?

This would also prevent ISPs from using broadband infrastructure investment as their hobbyhorse excuse. Whenever proposals might make business more difficult (or less profitable) for ISPs, they always state that new regulation will slow down investment on broadband infrastructure (see here, here and here). The arguments are, of course,  just corporate BS, since in Europe broadband infrastructure has been highly dependent on tax money (roads anyone?). By combining so-called “premium access fees” with broadband investment, the ICT giants could help maintain the infrastructure they make their billions from.