Tech Break: Anticompetitive, much?

Apple just brought their iPhone to the US’s largest wireless carrier. Comcast is rumored to be upgrading Internet speeds for the second time in less than three years. So competition from other companies in each mega-corp’s field is moving the market forward, requiring no regulation to keep it on the right path, right? Maybe, but there are a few rather deep, dark secrets that seem to point to both companies being a little too big, with too few observers for their customers’ own good.

First, let us look at Apple. In the interest of full disclosure, I have reviewed many Apple products thanks to Mines’ on-campus bookstore, and own both an iMac and a MacBook. In short, I concur that they, on average, make products that push the technology industry forward. They should keep doing that. However, whether due to Steve Jobs or those under him, the company has made some decisions that are downright anti-competitive, yet no one is willing to call them out. The two big decisions are iAd and non-removable batteries.

iAd is probably the less-noticed of the two actions that I mentioned. After all, you do not really care who is pushing ads to your iPhone and iPad applications, do you? I would say yes. Particularly since Apple has outlawed AdMob, now owned by Google, from placing in-application ads within iPhone apps. Ad outfits other than Google (and now Apple) do exist, and effectively all but Google are allowed access to the in-app ad market. However, Google owns the ad market because it balances reasonable commissions with high-quality targeting algorithms. Walling them off just distorts the market for in-application ads for what is now the third-largest smartphone market (Android is first, at least until Verizon iPhones are accounted for, and Symbian from Nokia is second).

Apple apparently figured out that taking a 40% cut of ad revenue for what amounts to almost every ad-supported app download is just as, if not more, lucrative than taking a 30% cut of application sales across its Mac and iOS stores. Plus, selling an ad does not require you to sell additional consumer hardware, just turn your current audience into a captive one and extract profit!

As an added bonus, Apple’s latest web browser iteration, which has been available for several months now, offers a special web page reading mode that strips ads and reflows text from multiple pages into one. While this strategy is excellent for removing unnecessary cruft from pages that are specifically designed to maximize ad impressions rather than make content easily viewable, the move seems disingenuous considering Apple’s near-stranglehold on the in-app ad market. It would almost seem as though Apple is encouraging advertisers to go to them if they want to make sure their ads are displayed, because you never know when some web browser might block those ads.

On the battery front, Apple has been marked over the past several years by a convergence toward computers that behave like consumer electronics. If it breaks, bring it in and a fix will be provided, for a fee. If we are talking about a smaller-ticket item, a replacement is in order rather than a repair. Recently, Apple has extended this mentality to batteries for, well, anything that uses a battery to keep things alive away from an outlet.

On the one hand, having a non-removable battery allows either the battery to be bigger, the device containing the battery to be smaller, or both. On the other, extended-life batteries and on-the-fly replacements just are not possible when the battery of your device cannot easily be removed.

To add insult to injury, Apple has recently started using proprietary head designs on all its screws. These “pentalobe” screws simply cannot be dealt with using normal tools, even when you count Torx heads as “normal.” The point is to make absolutely sure that repairs are done by Apple and no one else. Phillips head screws work perfectly in every situation where Apple uses pentalobes, but the Apple screws are what we’re stuck with.

The trade off here is that Apple can better control the entire experience of using one of their devices, which, in some cases, is a good thing. The downside is that unless you replace the screws with standard Phillips heads on your own, you will need to pay over $100 just to swap out your iPhone’s battery when it is depleted a few years down the road.
 
With Comcast, antitrust concerns have been more discussed, since they are, in many places, one half of a communications duopoly for high-speed Internet that is not throttled into oblivion after a gigabyte per day or a handful of gigs per month. On the other hand, some of their practices have been ill-explained, from what I have seen. Specifically, their Level3 relationship and their pricing policies are quite suspect from a competitive point of view.
 
On the Level3 side, the bottom line of Comcast’s December debate with the company is that Comcast, an end-user Internet service provider, wanted Level3 to pay them money because Level3, due to scoring Netflix as a customer for content delivery services, would end up sending Comcast more data than it received. Level3, on the other hand, stated that Comcast threatened to effectively deprioritize Netflix traffic if Level3 did not pay Comcast an information-age protection fee for its CDN data.

The companies’ positions would both be dubitable if it were not for evidence that Comcast is, indeed, putting data traffic in the slow lane unless content providers, as well as subscribers, are paying the company for access to its network. Comcast has negotiated direct connections to many networks (AT&T, AOL, and Sprint included) on the basis that, if these networks do not connect to Comcast (rather than simply purchase a high-quality path to the Internet at large), their data transfers to the company would go over data links that are, at peak times, woefully congested.

Even then, Comcast has a vested interest in making sure that their cable-based, for-pay video services perform better than Internet-based alternatives. I wish I was making this up, but YouTube crawls to a halt during peak times while I am connected at full speed within Comcast’s network, yet VPNing into Mines or, even better, the data center where “The Oredigger” is hosted nets me absolutely flawless streams. It does not take more than a few megabits to push a high-definition video stream, yet Comcast, despite its direct connections to Google, cannot seem to get that done. My hunch is that Comcast is running Google’s peering circuit “hot,” just like its “rest of the web” transit circuit, to make sure that cord cutters have to play by its rules.
 
On the pricing front, Comcast has some of the steepest prices for Internet access out there; with recent rate hikes, $67 per month buys you their standard Internet tier if you need to rent a modem and router from them. Yet their introductory and retention rates are low; after returning my modem and downgrading my plan to standard, I am paying around $35 per month for the same speed for which others are paying nearly double.

Potential competitors are aware of this enormous price delta, and as a result decide to stay safely within the confines of where their own infrastructure is already developed. Qwest, Comcast’s only big competitor in this area, has good pricing, at least for introductory specials, but their tiers end speed-wise where Comcast’s begin, or worse. I actually cannot get service faster than about four megabits down and 700 kbps up at my location, a stone’s throw from the Mines campus. Comcast gives me 12 Mbps down and 2 Mbps up now, with 50 Mbps down, 10 Mbps up speeds just a chat session away. 100 Mbps speeds will likely be available within the year, if I am willing to pay for them.
 
In short, both Apple and Comcast have ways in which they use their market power to edge out competition or make customers pay more for less than they should, and do, elsewhere. A battery change on a computer should be $70, not $170, and Internet service speeds should not vary wildly depending on whether the content you want is “on net” or not. Or maybe I am wrong here.  Set me straight in the comments of the online version of this article.


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