The New York Times reported back in May that the Federal Trade Commission was investigating the violation of antitrust laws related to Apple and Google sharing two board members on their boards of directors.  Apple may have crossed another line by creating a software monopoly for the iPhone.  This issue has yet to catch the attention of the Federal Trade Commission.

Background

Since the iPhone was released in June 2007, the only authorized way to download and install additional software on the device was through Apple’s own App Store.  Some technical wizards found a way to jailbreak the iPhone, which basically removes the restrictions imposed by Apple upon the device.  Though there are serious negative side effects to jailbreaking the device, some statistics show this practice to be on the rise.

The Monopoly

Since the Apple App Store is the only source of software for the iPhone, Apple has created a monopoly that adversely affects consumers by restricting their freedom of choice and software developers by restricting the means by which they can sell their products.  Let’s take these one at a time.

• Consumers:

• The iPhone is locked by Apple in a way that prevents its owners from using the device in the manner of their choosing.  Other smart phone devices, such as BlackBerry, Windows Mobile and Andriod, are not restricted by their manufacturers.
• The iPhone is treated by Apple like a licensed product rather than one that is purchased and owned by the consumer.  The consumer should be able to do anything with their iPhone that does not violate copyrights, trademarks or carrier policies.
• The consumer’s right to obtain and use the software of their choosing is violated by Apple.  Apple has given itself full and exclusive control over the software approval and rejection process, thus maintaining full control over the consumer’s device.
• Apple’s restrictions could potentially cause developers to further a new trend of developing web apps in place of native ones.  This could negatively impact the complexity of software available to the consumer.

• Software Developers:

• For independent software developers, time is a very precious resource.  It is a devastating blow to an independent developer to learn after work is completed that Apple has rejected their software.  Since the App Store is the only authorized means of installing software on the iPhone, this leaves the developer with an unsellable product and hours of wasted time.
• For larger software development firms, the salaries of their developers are often the largest expenditure included in their budget.  With iPhone apps reportedly costing anywhere from $2,000 to $150,000 to create, it’s obvious that arbitrary approval guidelines could have a severe impact on software firms.
• Developers have no way to sell the iPhone software they create other than through the Apple App Store.  As such, developers automatically forfeit 30% of their income to Apple as a commission on top of any other development costs they routinely incur.  Further, TechCrunch reports that when customers request refunds, Apple refunds the full purchase price, then charges their 30% commission to the developer.  This guaranteed commission structure is unheard of in any industry.
• Apple is gradually pushing developers toward creating web apps, as mentioned above.  This is a way for developers to break the chains of Apple, but is hardly an ideal solution.  Web app development requires a different skill set than native apps.  There is also more of a technical limitation to what developers can create in web apps as compared to native ones.

Conclusion

Apple has been, at best, self serving and arbitrary with regard to its iPhone app approval process.  Business Week recently provided a sampling of rejected apps along with Apple’s reasons for denial.  The reasons range from understandable but not their call, to absurd.

Some are of the opinion that Apple owns and operates the App Store and therefore has the right to approve or reject any app it chooses.  I agree 100%.  However, Apple restricting the iPhone from downloading and installing software from any other source creates a monopoly and that is not okay.

It would be in the best interest of iPhone consumers and developers for the Federal Trade Commission to take a look at this matter.

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