Euro Mobile Companies Moving to Block Apple, Google

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Europe’s mobile phone service providers are apparently unhappy with the power Apple and Google seem to have in their market and are looking at ways to take that control back from the companies. France Telecom-Orange CEO, Stephane Richard, has gone so far as to call a meeting with other service providers to start working on a joint strategy, and possibly even an alternate mobile phone OS, according to Mobile Business Briefing.

Mr. Richard will be meeting with the top executives from Deutsche Telekom, Telefonica and Vodafone on October 8 to discuss the situation and strategize on ways to cut off Apple and Google from having direct relationships with mobile phone users and push them back into seeing service providers as their point of contact for product features.

Apple has been successful at changing how consumers view their smartphones along with how they interact with their cell service providers thanks to the iPhone, iOS and the App Store. Google is following in Apple’s footsteps with Android OS and its Android Marketplace.

The carriers are said to be considering creating their own mobile OS to compete with iOS and Android, and are also considering building a custom version of the Android OS, or possibly Symbian OS. Once they have a solution in place, the carriers will push their OS on handset makers.

Europe’s mobile phone service providers haven’t met yet, so there’s no word on when they may have their own OS in place. The fact that they’re planning on meeting, however, is a clear indicator that carriers aren’t pleased with the changing mobile phone landscape.

Comments

Tiger

Wouldn’t that be called collusion?

prl53

Collusion is only illegal in the US. What they’re doing is working as an EU collective (another word for collusion but better than 50 different countries producing their own versions).

They can go ahead and try and force their phone standard on the people but the people will stand up and decide what they want by either buying or not buying what the EU produces.

(For those EU readers, I’m saying most of this with tongue in cheek. I’m not trying to be rude to the European countries.)

Substance

The carriers are losing their monopoly grip on customers because Apple and Google are giving power back to the customers and providing smartphones that people can actually use without being nickel and dimed.  So now they want to band together to discuss how they can get their monopoly back.  Absolutely this sounds like collusion.

Tiger

Wait, I thought Apple and Google were stealing all the power? wink

Jeff Gamet

Wouldn?t that be called collusion?

Yep. That sure sounds an awful lot like collusion to me.

Bosco (Brad Hutchings)

@Tiger: You can call it a Perkins waitress if you like.

Apple has the most to lose as they would get shut out completely. The core OS development costs are chump change for Google compared with the core app/feature development costs. The carriers start 5 years behind with 1/100 of Google’s R&D budget if they fork the Android OS without Google services. They could corner the subsidized market, but Google could also come at them with $300 unsubsidized handsets. Carriers lose their leverage when people can just buy the phones.

vasic

I don’t think that EU has much to be worried about. EU carriers have been dumb pipes much more so than in the US. Unsubsidised, pay-as-you-go model is much more common and popular than in the US. Even the subsidised plans often provide a fairly generic device without much special content and services. These carriers are finally learning the profit potential of Verizon’s ‘Control Everything’ model. However, the ship had sailed practically a decade ago, and it is hard to imagine an EU customer willing to buy a device that is artificially crippled by the carrier, or that forces him to use carrier service for things he used to get from whatever vendor was his choice.

With such high penetration of iPhones on the continent, it is unlikely that anyone would accept verizonisation of EU carriers (how do you like that verb, ha?)

Nemo

Bosco, I am afraid that you are way off base.  Google is the one with the most to lose.  I expect that the European telcos will choose to branch Android as their alternative OS, as China Mobile and other Chinese telcos and OEMs have done for the Chinese market.  The other alternatives are either not viable or are worse.  Symbian, even though Nokia open-sourced it, would place Nokia in a position of power, which is just what the Euro Telcos want to avoid.  There is no point in replacing Apple and Google with Nokia.  Symbian also has a reputation among developer as a piece of crap mobile OS and hasn’t a tenth of even Android’s apps. 

LiMo has never gained traction as a mobile OS and has even fewer apps than Symbian.  It also has the disadvantage of the GPL license which can be the kiss of death for both developers and companies that want a proprietary solution.

The middleware option also fails, because the Euro Telcos would have to start their apps stores from zero, and middleware, especially on mobile devices, would create unacceptable slower performance and use too much computing resources on mobile devices.

So that leaves Android.  By branching Android, the Euro Telcos not only break Google’s power but can leverage developers’ existing Java skills, tools, and apps created for the MarketPlace.  Android is the second best mobile OS, after the iOS, and is pretty good.  Euro Telcos could also leverage all of the OEMs that currently make Android phones.  And they have a successful model:  China Mobile and other Chinese parties by creating their own branch of Android have devastated Google in China; captured all of the ad, search, and personal info revenue from China that would have gone to Google; and have captured the direct relationship with their Chinese customers.  By branching Android, the Chinese have destroyed Google in China, and I expect that the European telcos will do the same in an effort to destroy Google in Europe.

And Google can’t do anything about it, because Android’s code is open-sourced.  There are only two reservations about using Android.  Android is based on Linux and, thus, large and essential sections of its code is covered by the GPL, which, as noted, supra, can create problems for developers and those who what a proprietary OS.  However, I believe that the version of Linux that Google uses for Android has a Class-Path exception so that developers can develop their apps with out fear that they will fall within the ambit of the GPL. 

The other problem is the Oracle v. Google infringement lawsuit over the use of Java in Android.  This is a serious suit that Google could lose.  However, I think that the Euro Telcos believe that they could strike a deal with Oracle, and I believe that they would be correct in that belief.

So Android, it most likely will be, and thus, another revenue stream from a major geographic market will be under threat, though it will take the Euro Telcos significantly longer to eviscerate Google than it has taken the Chinese.

Apple, however, should fair well, though it will face a tougher competitive environment.  Though the Euro Telcos can create an alternative, competing mobile OS (Euro Android) and device, my understand is that European competition law prohibits them from offering such a device exclusively on their networks.  They must, according to my understanding, offer Apple’s iOS devices on terms that give Apple’s iOS devices a fair opportunity to compete with any Euro Android devices offered by the Euro Telcos.  So Apple will face the challenge that it has always faced and that it has always overcome:  That of making the best products and services that provide the best user’s experience for the typical user.

Google, on the other hand, is screwed, because it doesn’t make any devices, at least not since the demise of the Nexus One, so it has no device to compete with any potential Euro Android devices, and it will get no or a lot less revenue from Euro Android, as the Euro carriers will either replace Google’s services on Euro Android with their own services or charge Google an onerous fee—probably a huge slice of its ad revenue—to be on Euro Android devices. 

First China, then Europe.  The mood in the board room, where Google’s senior managers meet, must be grim indeed.

Ethan

Actually Google will probably not care. Great article over at ars on HTC doing something similar:

http://arstechnica.com/gadgets/news/2010/09/htc-moves-beyond-the-phone-marginalizes-google-in-the-process.ars?utm_source=rss&utm_medium=rss&utm_campaign=rss

“Google may be comfortable with this?though it represents a potential loss of revenue, the company’s main purpose is to sell adverts, so as long as Android phones have free and unfettered access to the web, Mountain View should be happy. The hardware companies win?free access to a decent middleware platform?and though Google won’t exactly be winning too, it won’t be losing. Besides, there’s always revenue from the Android Market.”

In the end Google just wants the user to have clear internet access to use their google online tools and see the ads. Unless the carriers actively filter what the user will access on the internet from their phone, Google wins. If they do block internet stuff then EU/users will sue them into limbo.

Nemo

Well, Ethan, if all that Google is going to get is unfettered access to the Web, which it, by the way, does not get in China—Android is wasted expense, because Google get unfettered access to the Web on any Web browser. 

But, of course the author at Ars Technica is wrong.  By not having its services deployed on its successful platform or if it must pay a King’s ransom to get its services installed on a branch of Android, Google loses major revenue that comes from not collecting a user’s private information, which Google uses to sell stuff or which it sells to marketer; from the dramatic reduction in the opportunity to present advertising of all types; and from the lost opportunity to present ads with search.  These are major streams of revenue for Google, were Google’s primary motivation for doing Android and Chrome; and are the only justification for Google to continue development of Android and Chrome. 

And another major fragmentation of Android takes it down the road of balkanization that destroyed Unix as mass market OS.  Google also loses revenue from the Android MarketPlace.

While Google can easily afford the multimillion dollar expense of developing and maintaining Android and Chrome, it clearly isn’t worth it for Google to do so without the revenue derived from its services installed on Android phones.

b0wz3r

Comment threads here are so much more enjoyable to read now I’ve but HateMonger on /ignore.

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