Apple - Legal Challenges II

Apple - Legal Challenges II

by Pininvest Analysis

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Pin-insights

The Internet and Cloud-based applications revealed the commercial value of virtual spaces

The 'Cloud', which is a server-based communication network, came to be perceived implicity as a bountiful public good, free for the taking by the most audacious and the most enterprising

Voiding in advance arguments of deprivation constraining competitors, the building of 'eco-systems' as gated condominiums in this pristine space was, with the benefit of hindsight, preordained

...leaving unanswered and undefined the legal rights - if any - of the general public over this communication network, in terms of transparency, data protection and freedom of choice, rights which might predate the eco-systems themselves

Belatedly, while commercial interests have grown  immensely, the Courts may have to take a stand

 

***

 

Virtual spaces

The ability to monetize the attention of large cohorts of visitors, accessing the services for information or for play, became soon the key differentiator driving the growth of the world’s greatest companies (Facebook , Apple or Google ) and rubbishing the also-ran such as Yahoo or Myspace...

Although it should have been obvious from day one that user attention was snatched from established businesses (cable services, cinemas, traditional news media, advertising…), the unique quality of the virtual services was overwhelming

Making a clear case of ‘creative disruption’, with new high-quality services delivered by new channels in a new space, technological innovators never balked at the price of any app, provided it was uniquely positioned to deliver an expanding menu of choices to their users

Barriers soon turned out to be unsurmountable for legacy firms constrained by specialties honed over decades – and of course, reluctant to pay outrageous prices to scrappy start-ups for complementary services which might have revamped their offer…until it was too late

 

This is how it came to be

...limiting severely the traditional advertising businesses losing out to digital ads by Facebook and by Google, multi-channel cable television battling vast choices of on-demand films, sharing life experiences in picture and on social networks voiding the more traditional community relationships…

The new virtual empires may have become vast, dominating entire sectors of the economy (such as advertising) but it is striking to observe how the potential risk of monopolistic abuse was never raised (except when Microsoft tried to squeeze direct competition, a classic and old-fashioned 'playbook' from quite some time ago...)

It is not unreasonable to suggest that global dominance by American technology firms added valuable recognition and goodwill to the all-important U.S. influence in far-flung regions, as Google, for instance, is demonstrating every day in rural India

Even China’s great virtual wall was accepted with a shrug…until Chinese apps entered the global space, meeting American interests head on, as the recent wrangling around Tik-Tok and WhatsApp shows in spades…

 

The Internet is fragmenting and has been splintering for a relative long time into virtual ‘islands’ monitored by commercial enterprises...

But the novelty and the value delivered to end users – and the willingness of these users to park rich personal information with the tech providers – hardly made the case of monopolistic practices of the 'islands' themselves relevant

Implicitly, the server-based communication network was defined as a bountiful public good, for the taking by the most enterprising and voiding in advance arguments about anti-competitive  practices in eco-systems conceived as 'walled gardens'

Concurrently, the value attached to these virtual 'eco-systems', controlled by commercial businesses, has been linked exclusively to the investments allocated by private enterprise, recognizing no value at all to the untouched ‘native’ public space – and therefore, no 'original' right to the general public over this native space

 

A public good ?

With the invention of barbed wire, patented by Joseph Glidden in 1874, free range ranching came to an end on the prairie frontier

credit - History Daily

Barbed wire, twisting the double strand of wire with shorter, spiked wire to create spurs, replaced wooden fencing, costly for dearth of local wood and labor intensive, and ineffective plain wiring

With barbed wire to contain the animals, farmers avoided loss to predators and cattle rustlers, increasing the size of their herds and, as any Western movie buff will know, ended up favoring wealthier farmers who owned the largest plots

Small-time farmers were the losers…without access to public land for grazing and, even if they did manage to raise their herds, the fencing impeded them from getting their animals to market across the once-open plains…

 

If the analogy sounds familiar, it is because it should

The early days of the Internet bore a semblance with the wide open plains of America’s frontier land, allowing any entrepreneurial spirit to roam freely on the World Wide Web… but that was in 1989

No less effective than barbed wire in fencing-off plots, walled-off ‘gardens’ have fragmented the web, splintering or breaking into loosely coupled islands of connectivity

Departing from the Open Internet, fragmentation has been assessed with a focus on technical impediment, governmental intent and commercial purpose, in a 'World Economic Forum' 2016 report

Its description of commercial purpose pertains to the organization of specific markets and digital spaces and the experiences of users that choose to participate in them

 

In 2010, Wired elaborates with the title  “The Web is Dead, Long Live the Internet” in an article quoted extensively by the WWF report (page 53)

"One of the most important shifts in the digital world has been the move from the wide-open Web to semi-closed platforms that use the Internet for transport but not the browser for display.

It’s driven primarily by the rise of the iPhone model of mobile computing, and it’s a world Google can’t crawl, one where HTML doesn’t rule.

And it’s the world that consumers are increasingly choosing, not because they’re rejecting the idea of the Web but because these dedicated platforms often just work better or fit better into their lives (the screen comes to them, they don’t have to go to the screen).

The fact that it’s easier for companies to make money on these platforms only cements the trend.

 

The legal case on behalf of Apple could not be posited more convincingly and subsumed in fewer words – the implications are clear

Consumers should be free to opt for dedicated platforms rather than the open Web and this freedom has to be protected

In fact, Apple’s success does not in any way point to monopolistic abuse, but demonstrates the strength of a visionary choice, made years ago – the integration of software and hardware, enhancing user experience within a tightly scripted ecosystem

…until lawsuits targeting Apple and the Apple Store

 

A fork in the road

As we hope to argue in our follow-up reports, legal rights placed in a broader context make for uncomfortable questions

…built-in constraints of the iOS ‘eco-system’ have simply been laid bare by the rash of lawsuits

…but the optics have shifted as the abuse of dominant power has been putting the onus of proof on the Internet giants in a broader sense

 

It may be argued that, in terms of monopoly power, Apple’s position is fail-safe

Supreme Court jurisprudence is clear - no business has ‘a duty to deal’ and in case of 'dealing', the terms on which to do so are set by the business entity

It is true some recent developments are standing awkwardly against the ‘story-telling’ of rigorous control exercised by a neutral gate-keeper of the iOS eco-system

  • Apple’s own failed effort to argue large license payments to Qualcomm should be squashed, forcing a compromise out-of-court settlement,
  • The rejection by the Supreme Court of the firm’s argument customers buying apps on the App Store were not its clients…It turns out they are…

Hardly sufficient to reverse long-standing jurisprudence...

Still, hemmed in as it may be, Epic Games’ lawsuit appears weaker than anticipated, not because the case of monopoly practice is difficult to make, but because the supposed abuse of monopoly power is not addressed in the novel terms with which the public is becoming familiar - a measure of control over personal data, freedom of choice and transparency

credit - Robert Johnson

Obviously, these popular issues are not necessarily shared by Epic Games which, as a commercial enterprise, partakes in many of Apple's frays to resist public rule-setting in the general interest, and so do all the other Internet-based tech giants

A profound choice - a fork in the road for the Internet of tomorrow all the same...