Back in March, some carriers complained to the EU competition authorities over Apple(s aapl)’s channel tactics, such as its alleged use of excessively high sales quotas to make sure carriers’ marketing budgets go disproportionately in the direction of iPhones and iPads. Two months on, and it seems the authorities are quietly probing the issue.
First off, it’s important to realise that no formal complaints have been made and the European Commission has not launched a formal investigation. However, according to a Financial Times report on Sunday, the Commission has sent a questionnaire to several European carriers, asking them to clarify what Apple asks them to do.
The article claims the questionnaire asks whether operating groups are forced to buy a certain quota of iPhones, whether Apple dictates how marketing budgets should be allocated, and whether the U.S. firm demands subsidies and sales terms that are at least as favorable as those offered to other manufacturers. Interestingly, it also says the Commission is looking into potential “technical or contractual restrictions on the iPhone 5 that mean it cannot be used on high-speed 4G networks in Europe.”
The 4G factor
As I explained in March, there’s a lot standing between where we are now and a full-blown antitrust case – for a start, Apple does not actually dominate the smartphone market in Europe (it has around 25 percent share), making it less likely to be the target of an antitrust crackdown. Simply put: it’s not that hard to jump the iOS ship for Android or some other alternative.
That said, the questionnaire’s mention of restrictions on the iPhone 5’s 4G capabilities is intriguing.
The European (GSM) version of the iPhone 5 does have natural limitations as to which LTE networks it can run on, due to the bands it physically supports – it will run on Deutsche Telekom’s 1800MHz spectrum in Germany, for example, but it doesn’t support 800MHz or 2.6GHz LTE, so Vodafone(s vod) has to sell the iPhone 5 as a 3G device that country.
However, there have been reports suggesting that Apple’s restrictions extend beyond the strictly necessary. The company apparently heavily vets the LTE networks it will support — even an unlocked iPhone 5 will not run on an unapproved LTE network. The question now is whether this is entirely a technical matter, or whether commercial reasons also come into play.
I’m waiting for the Commission’s antitrust office to get back to me (my guess at this point is that they’ll say the questionnaire forms part of its regular market-monitoring activities), but, as I have said before, I’m skeptical that this will evolve into a formal investigation. The only basis on which I can see that happening would be the definition of Apple’s platform as a market in its own right, independent of the wider picture that also includes the actually-more-dominant Android(s goog).
If that were to happen, it would be a game-changer — Apple might be forced to allow alternative app marketplaces, for example. But let’s wait and see what happens before we speculate too far down that path.