[DM-MUG] re-print from NY Times

[Geoffrey Stevens]

Is Apple a Victim of Sour Grapes?

by Migueal Helft –
NY Times

 

SAN
FRANCISCO — As Apple fans line up at stores on Thursday morning for the release
of the fourth iteration of the iPhone, the company is riding high.

 

And it’s not just the iPhone. Sales of the iPad tablet
are strong too, and Apple has surged past Microsoft to become the most valuable
company in the technology industry.

But as one success follows another, the company
finds itself in a bewildering position. As the tech industry’s perennial
underdog, Apple was frequently scorned and dismissed by larger and more
successful competitors like Microsoft or Dell. Now, with growing frequency, the
company is seen by competitors and other industry players as a bully.


Companies like Google and Adobe have accused Apple
of unfairly using its clout to exclude their technologies from the iPhone and
iPad. And some application developers are fretting under Apple’s tight control
of those devices, even though many of them built their fortunes on the popular
gadgets.

But perhaps in the clearest sign that Apple has
emerged as an industry superpower, government regulators are beginning to
scrutinize its every move.


“This is unfamiliar territory for Apple,” said Tim
Bajarin, president of Creative Strategies, who has followed Apple for nearly three
decades.

The changes are a testament to the remarkable
turnaround orchestrated by Steve Jobs who returned to Apple more than a decade
ago when the company was on the verge of extinction. But those changes have
also thrust the company into an unexpected and potentially perilous role as
competitors start to cooperate with each other against Apple.


For all the complaining, Apple’s self-interested and
quirky pursuit of innovation is not new.

Time and again, it has been willing to break with
technology industry standards by doing things its way, even if it ruffled
feathers. “Apple has always marched to its own drumbeat,” Mr. Bajarin said.

The company often irked suppliers and confounded
pundits, for instance, when it chose to use 3.5-inch floppy disks instead of
the more common 5.25-inch disks, or later, when it did away with floppy disks
altogether.

But now that Apple has grown from a niche player
into one that leads the fastest-growing segment of the industry — mobile
computing — its actions are far more consequential and the complaints have
turned to grievances.

“People used to say, ‘Apple is crazy, they are
making a big mistake,’ ” said Paul Saffo, a veteran Silicon Valley
technology forecaster. “Now they are saying Apple is trying to kill
competition.”

The complaints are in some ways surprising because
Apple, for now, is far from reaching the kind of dominant position enjoyed by Microsoft
in PCs or Google in search and online advertising.

While the iPod and iTunes lead the market for music
players and online distribution of music, Apple remains a small player in PC
sales. It is only now entering the digital advertising business and the sale of
electronic books.

Even in smartphones, it lags behind Research In
Motion, maker of the BlackBerry, though its devices dominate the market for
mobile applications.


Perhaps the loudest complaints this year came after
Apple barred some third-party programming tools from the iPad, including
Adobe’s Flash software, which is widely used to create online videos and Web
applications.

The decision led to a very public war of words
between Adobe and Mr. Jobs. It also prompted the Federal Trade Commission to
begin asking questions about the effect of Apple’s decision on competition.

“To ignore a major component of the Internet like
Flash seems a little silly,” said John Warnock, a founder of Adobe. Mr. Warnock
said Mr. Jobs would have proceeded more cautiously when the company had less
clout. “Apple does what it does,” he said. “But I don’t think that they would
have made a decision like this 10 years ago.”

Mr. Jobs, who declined to comment for this article,
has forcefully defended Apple’s decision to exclude Flash, saying it was
strictly for technical reasons. He disparaged Flash for consuming too much
battery power and for what critics call its security flaws.


And he said Apple was simply making a bet that the
technology, while popular today, was quickly falling out of favor and would
soon be overtaken by others.

Customers “are paying us to make these choices,” Mr.
Jobs said during a recent public appearance.

Perhaps Apple’s swiftest and most startling
transformation from underdog to looming monopolist came in the world of mobile
ads, a market the company is just entering.

Only weeks ago, the F.T.C. was on the verge of
blocking a merger between Google and AdMob, which specializes in placing ads
inside iPhone apps.

Regulators said that the merger would give Google,
the largest seller of online ads, a virtual lock on the small but fast-growing
market for mobile phone ads.

The
commission approved the deal, but only after Apple acquired Quattro Wireless,
an AdMob rival, and announced its own iAds advertising system for mobile
phones, to be included with the iPhone 4.

 

Then
this month, Apple appeared to make the switch from excluded to excluder in the
mobile ad market. New policies for the iPhone 4 bar Google and AdMob from
selling ads on the device, resulting in a complaint from Google, which was in the
unusual position of playing victim.

 

“Artificial barriers to competition hurt users and
developers and, in the long run, stall technological progress,” wrote Omar
Hamoui, the chief executive of AdMob.

After Mr. Hamoui’s complaint, the trade commission
expanded its investigation of Apple’s practices to include iAds, according to
people briefed on the matter who did not want to be identified because of the
delicacy of the investigation.


The commission’s inquiry is not the only one
concerning potentially anticompetitive behavior by Apple. The Justice
Department recently began a preliminary investigation into whether Apple pressured
music labels to exclude Amazone.com, its rival in digital music distribution,
from certain licensing agreements. And Apple is one of many Silicon Valley
companies whose hiring practices are being examined by the department.

The latest inquiry from the commission has raised
eyebrows among some antitrust experts, in part because Apple currently controls
less than a third of the smartphone market in the United States.

R.I.M., with its BlackBerry, remains No. 1, and
phones based on Google’s Android software are quickly gaining acceptance with
consumers and application developers. But some said the government was right to
be concerned.


“Apple has gotten really aggressive in trying to
flex its muscles and trying to take advantage of its position in the market,”
said Andrew I. Gavil, an antitrust expert and professor of law at Howard
University.

“The question is whether they have gotten
significant enough in any of these markets to affect competition,” he said.
“The answer appears to be yes.”

While Apple has created a large ecosystem that has
made some application developers rich, many are now fretting that the company
has too much control over the world it created.

When an iPhone developer at Facebook announced
recently that he was moving on because of Apple’s restrictions, the influential
technology blog TechCrunch ran a headline saying the person left “over Apple
tyranny.”

And when the maker of a popular app pulled out of
Apple’s store in frustration over delays in approving a new version, he asked
in a widely read blog post, “Was your intent to shut us down by playing the
waiting game?”

For Mitchell Kapor, who invests in technology
start-ups including developers of mobile phone applications, it brings back
memories of confronting Microsoft while running the Lotus Development
Corporation in the 1980s.

“The
amount of resentment is very, very large,” he said, “and reminiscent of the
kind of resentment there was toward Microsoft when it was the platform an app
developer had to be on.”





 		 	   		  
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