Photographer: Camera Press/Redux

EU Probe on Android Threatens Google’s Position in Apps Market

A European Union probe into Android mobile software poses a threat to Google Inc.’s position in the $35 billion applications market and may give the likes of Samsung Electronics Co. more leeway in the programs they use on devices.

The investigation focuses on Google’s strategy of bundling software such as YouTube, Maps and Chrome with its Android operating system and whether the practice harms rival app developers as well as device manufacturers that have to take the whole package. It’s also examining whether handset makers are blocked from developing their own versions of Android, adding to Google’s worries in a region that makes up a third of its revenue.

Introduced in 2008, Android was Google’s answer to Apple Inc.’s and Microsoft Corp.’s operating systems as the Mountain View, California-based company sought to expand beyond Internet searches into mobile phones. Google’s search product is already under scrutiny by the commission, and it’s still struggling with a decision by the region’s top court last year that people have a right to have search results about them deleted.

“We’re buying these things for the apps,” said Roger Entner, an analyst at Recon Analytics LLC in Boston. Any decision to force Google to open up Android would “make it a lot easier for the handset manufacturer or the carrier to pick and choose their own maps or messaging or you-name-it app rather than have to carry the Google app.”

Less Revenue

Google made Android freely available to any handset maker. In return, it benefited from the phonemakers’ industrial scale and marketing clout to quickly reach hundreds of millions of users. Android was used in 82 percent of all smartphones shipped last year, extending its lead over Apple’s iOS, according to researcher IDC. While Apple’s App Store generates more revenue, the Google Play app marketplace took in 60 percent more program downloads, according to analytics company App Annie Ltd.

The global mobile-apps market will probably more than double to $76.5 billion by 2018, according to Statista.com, which used data from researcher Gartner Inc. and TechCrunch.

Besides Samsung, HTC Corp. and Huawei Technologies Co. are among the Android phonemakers that have the most at stake in the result of the investigation. Instead of selling its own devices, Google benefits from Android through mobile ad revenue and adoption of its compatible apps.

Suwon, South Korea-based Samsung in particular has been chafing under Google’s rules, and has carved out its own share of the software market, investing in its own operating system known as Tizen.

Earlier Probe

Spokesman for Samsung and HTC declined to comment. Kevin Ho, president of Huawei’s handset division, said the company already offers alternatives to Google’s applications in China and that customers “really love” its solution.

Al Verney, a spokesman for Google in Brussels, declined to comment beyond the company’s blog post on Android earlier Wednesday.

The pre-installed Google apps don’t prevent customers from adding others programs, nor do they take up an inordinate amount of space on the devices, said Dan O’Connor, vice president of public policy for industry association CCIA, whose members include both Google and rivals such as Microsoft. That may make it difficult to prove Google is being anti-competitive, he said.

The case is reminiscent of an earlier probe of Microsoft by the EU, said Richard Edwards, principal consultant at Ovum Plc in London. Microsoft in 2009 settled the long-running antitrust dispute by including a screen within its Windows operating system that lets users switch off the company’s Internet Explorer and install rival Web browsers.

“If the investigation finds that Google has a practice of demanding that their applications be installed on the devices, we could well see a similar solution insisted upon, particularly in the European Union,” Edwards said. “What we also might get is a version of Android that doesn’t have any of these services pre-installed.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE