The Orange View (on hiatus) Because Apple is great but it isn't perfect


Google is not leveraging its monopoly with Android

Google's poorly-considered broadside against smartphone patents has done little to further the otherwise worthy argument that our intellectual property policies are hindering innovation more than aiding it. But they've also brought out some of the Google trolls, like Windows guy Paul Thurrott. And he's even got John Gruber linking to his nonsense of the day, unfortunately. Here's the core of the nonsense:

Google licenses Android for free. So by raising the price of Android by imposing licensing fees on technologies Android is in fact using, Apple, Microsoft, and others are arguably simply leveling the playing field and taking away an artificial Android advantage, forcing the OS to compete more fairly. Arguably, by "dumping" Android in the market at no cost, Google--which has unlimited cash and can afford to do such a thing--is behaving in an anticompetitive fashion. In fact, one could argue that Google is using its dominance in search advertising to unfairly gain entry into another market by giving that new product, Android, away for free. Does this remind you of any famous antitrust case?

-Supersite for Windows, August 4, 2011

For the sake of argument, let's assume that Google has a durable monopoly in search and ignore that the case against Microsoft was gutted on appeal. Even so, giving away Android for free is not leveraging its search monopoly and isn't likely to raise any kind of antitrust issues.

Back in the 1990s, Microsoft forced everyone who installed Windows to install Internet Explorer and went so far as to remove the uninstall option. It didn't just decide to give it away for free -- it required anyone using its monopoly product to install it for free. Needless to say, that's not the Android situation. Google search is available on all mobile phone platforms. You don't have to install Android to get it and just using Google search doesn't require Android.

One thing that seems to drive Google critics crazy is the company's strategy of giving away software and services for free. Thurrott goes so far as to call it anticompetitive, which is just silly. Free and freemium are completely legitimate business models. Is free over-the-air television unfair to cable companies? Is Apple giving away iTunes software unfair to developers who sell music programs? Is USA Today's free web site unfair to the New York Times? Obviously not.


Posted by Aaron Pressman

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  1. I have a large farm where I grow carrots, and I have the best and largest land for growing them. As the entire ecosystem I am in is built on horses eating carrots, all growth eventually turns into me making even more money: I am flush with cash and have the worlds largest silos and most interesting farm equipment.

    Given that I have so much cash, and pretty much all the worlds strongest farmhands work for me, I decide to “have some fun”: I build “ok” stuff an give it away for free.

    I mean, sure: there’s some guy out there selling buggy whips, and they are awesome, but I can just hand our buggy whips /constantly/: they fall apart, but they work, and many (most?) people don’t care.

    You could say I’m “losing money” on the buggy whips, but the fact that people were spending that money on buggy whips is just more money they weren’t spending on carrots, so I am not losing as much as you’d think.

    However, my “competitors” (do I even bother to think of them as such?… they are pretty much ants in comparison) find it harder an harder to operate in this environment: they need to actually make money on those whips.

    Even worse, customers don’t even seem to realize anymore that buggy whips have any underlying cost: or anything else, really. People who offer buggy whips for money are seen as “greedy”, and customers even start to question why they are paying money for saddles… some even call for me to make those for free too (and why not: consider it done).

    This turn of events is awkward, and damaging on the entire economy: I am simply going aroun messing with every market I consider smaller than me, messing with the incentives.

    Why? Partly fun, but it is certainly difficult to discount “power” as a contributing factor: it is a wonderful feeling to see my bran on every product, and make everyone super reliant on me for /everything/, not kist their carrots. Hell: people even like me more, because I’m obviously so “altruistic”.

    Now, how can I do this? It is not that I have some awesome “free or freemium business model”: it is only because I have a mear monopoly on carrots. If I had any serious competitors on carrots, their prices would be lower, as they wouldn’t be wasting cash handing people free buggy whips (and free everything else, even stuff totally unrelated to carrots).

    This /is/ leveraging a monopoly. If you can do something that accumulates power and assets that is only possible because you have a monopoly and you choose to actually take advantage of it, that /is/ leveraging.

    Of course, it is also important to ask “is it legal?”, and the answer might very well be “yes”. Bundling, a specific form of leverage that Microsoft was using, was considered illegal, but I am not a lawyer and have no clue how comprehensive the laws were.

    But seriously: you cannot imagine that it is an efficient use of our economic resources to have Google buying up anyone who sells something awesome (including Android: that was an acquisition) so they can give it away for free instead.

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