Banning “Closed” Mobile Ecosystems Would Hurt Consumer Choice and Competition

Daniel Castro January 23, 2022
January 23, 2022

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Policymakers in the United States and the European Union have taken aim at a handful of large tech companies with a slate of proposals to restrict their business models. High on this list are rules that would require Apple to allow users to install apps from app stores other than its own, a change its critics say would foster competition and consumer choice—but in reality, would do the exact opposite by forcing Apple to abandon its closed mobile ecosystem, thereby eliminating an important alternative to open mobile ecosystems.

Apple and Google have developed two very different types of mobile ecosystems. Apple has created a closed ecosystem where the company controls both the hardware (i.e., the iPhone) and the software (i.e., the operating system and the apps), whereas Google has created an open ecosystem where its Android operating system can be run on any mobile device and users can install any apps. There are pros and cons to both closed and open ecosystems.

The benefits of a closed ecosystem are that since a single entity can control almost every element, it can ensure products work perfectly out-of-the-box and it can standardize the user experience, such as by setting default software settings, enforcing strong privacy and security features, and establishing minimum hardware requirements. It can also add new features without worrying about third-party compatibility, as Apple has done with iMessage for texting, Apple Handoff for switching between Apple devices, and AirDrop for sending files to other Apple devices. Of course, there are potential downsides, such as users facing limits in what they can do with their devices or available configurations.

In contrast, the benefit of an open ecosystem is that it offers users virtually unlimited opportunities for customization. Users can choose the exact hardware and software setup that works best for them, creating for many users a more optimal setup, such as by running on cheaper hardware or adding additional features. The potential downside is that these products may require more effort on the part of users to configure to ensure they work as expected, and performance may vary from product to product or user to user.

Some consumers will prefer open mobile ecosystems, and some will prefer closed ones. Competition between these different business models is good for consumers, both because it gives them more choices and because it encourages each model to address the benefits of its alternative. Unfortunately, policymakers in the United States and Europe have pushed for proposals that would make it impossible for Apple to continue to offer a closed ecosystem by requiring the company to allow users to install apps from other app stores—a process commonly referred to as “sideloading.”

Various fast-moving legislative proposals include this requirement. The EU’s Digital Markets Act would require so-called “gatekeepers” to allow “third-party software applications or software application stores” on their devices. The American Innovation and Choice Online Act, recently passed out of the Senate Judiciary Committee, would prohibit covered platforms, such as Apple’s App Store, from restricting its devices from using third-party app stores to load software or requiring those apps adhere to certain terms. And finally, the Open Apps Markets Act, which is expected to be marked up by the Senate Judiciary Committee this week, would explicitly require Apple to allow users to “install third-party Apps or App Stores.”

Such a change would not be a minor detail, but a fundamental shift in the type of products and services Apple could deliver to its customers. For example, Apple is rightly concerned that it would expose its users to a wave of privacy and security threats, because it currently screens all apps for these types of risks before allowing them in its App Store, and these requirements would allow users to load apps from third-party stores that it has not reviewed. As the recent Nokia 2021 Threat Intelligence Report noted:

While Google has taken an open approach to app development and distribution, Apple has always maintained a proprietary approach, allowing downloads only through the official App Store. As a result, Apple products have generally been considered the most secure mobile computing platform.

Forcing Apple to allow third-party app stores would create a security risk for all of its users, not just those who actively seek out third-party app stores, because other users could be tricked into installing malware from these third-party sites too. Once lawmakers force Apple to build the backdoor, neither policymakers nor Apple will be able to control what comes through. For example, Apple would be unable to block apps that promote online piracy, endanger children, allow hate speech or harassment, facilitate criminal or terrorist activity, or even pose a threat to national security. Unfortunately, many of the policymakers pushing these proposals have so far refused to engage substantively on the risks of sideloading. For example, a spokesperson for Sen. Amy Klobuchar (D-MN) recently dismissed the critiques, calling it “a desperate attempt [by Apple] to preserve their app store monopoly.”

It is not enough for those pushing for these reforms to outline some of the potential benefits of an open mobile ecosystem as justification for these requirements. For example, Sen. Richard Blumenthal (D-CT) has promoted the Open App Markets Act by arguing that it would “break these tech giants’ ironclad grip, open the app economy to new competitors, and give mobile users more control over their own devices.” Of course, there are benefits of open ecosystems, but there are also benefits to closed ones. The burden of proof should be on those pushing to ban closed mobile ecosystems to explain why consumers should not have a choice between the two competing models, and how eliminating a thriving business model would advance consumer welfare, competition, and innovation.