Apple flexes its muscle

Today, our reporter Patrick Stafford takes a look at a growing spat between US regulators, Apple and that little search engine company called Google.

The Federal Communications Commission is investigating Apple’s decision to reject an iPhone application developed by Google for its new Google Voice platform.

Google Voice is an internet telephone service that provides users with a single telephone number for their home phone, mobile phone and any other phone they might be running. The service then allows users to determine which contacts can call which numbers at certain times, as well as enabling users to send text messages via a PC and have voicemail transcribed into text.

Nice idea, eh? Not according to Apple, which has rejected the Google Voice iPhone app and removed all third-party Google Voice-enabled applications from the App Store.

This sparked a wave of protest from iPhone users and a lot of finger pointing over who was to blame.

Apple blamed AT&T, the iPhone’s exclusive carrier in the US, claiming Google Voice duplicated some AT&T services.

AT&T deflected this blame, pointing out that Apple controls the App Store.

Now the US Federal Communications Commission has written to all the parties, trying to get the bottom of this and talking vaguely about its “mission to foster a competitive wireless marketplace, protect and empower consumers, and promote innovation and investment”.

The case, and the incredible growth of the iPhone’s user base and the App Store’s download rate (heading towards two billion as we speak) raise some interesting questions about Apple’s power over a growing segment of the market.

Apple is in a unique position. Because its device is so popular, it is able to control the conditions of the whole App economy (because it controls the iPhone hardware and software), the size of the App economy (because it says how many iPhones are produced and sold, and at what price) and the App market itself (because it has the ability to approve or reject each individual App).

The closest analogy I could come up with (and it’s a bit clumsy, I admit) is that’s kind of like controlling the roads and controlling the only car dealership through which every car maker is allowed to sell their vehicles.

The power Apple wields is phenomenal. And as iPhone App developer Marc Edwards said on a recent SmartCompany webinar, because the App Store so far ahead of other App markets set up by Google, Nokia and Microsoft, developers have no choice but to agree to the conditions of Apple’s store and its approval process.

So far, this hasn’t seemed to be much of a problem – develop an iPhone app and as long as it’s not offensive, it should be approved.

But the rejection of Google Voice suggests that Apple is now prepared to make some tough decisions on Apps, where it or its partners’ interests are threatened.