Does the FCC want to understand the app store market or control it?

By Paul Lambert

The US Federal Communications Commission is taking its first look into the unregulated business of application stores, having sent letters to Apple, its US carrier partner and Google asking for answers as to why Apple blocked Google’s voice-over-IP (VoIP) application, which enables AT&T subscribers to make free voice calls.

The move amounts to a fundamental investigation by the FCC into operators’ business models, in particular their right to determine which services end-users can access over their networks.

The letters also put operators’ positions on VoIP services in the spotlight. It’s not surprising that the FCC’s call for information into application stores was kick-started by a VoIP application. VoIP – that is to say the promise of free voice services – raises the question of how much control operators can exert over their networks.

The letters amount to an admission by the US government that it has little knowledge of the business models surrounding application stores.

This a positive sign, because it shows that the government has let the industry manage important elements of the value chain by itself.

The letters also reveal that the FCC probably has some idea of how the application-store business model should work, and hint that it is not happy for any element in the value chain to exert too much control.

The letter

After receiving the letter on July 31, AT&T said that it has no say over which applications are approved for use on the iPhone application store, fingering Apple as the party responsible for locking out Google Voice. The worst-case scenario for Apple and AT&T, and mobile operators in general, would be if the FCC mandated access to Google Voice and applications like it.

In the letters, the FCC has asked Apple and AT&T to explain in detail how the approval process works for iPhone applications. The FCC has asked Apple to explain why it rejected the Google Voice application for iPhone and removed related third-party applications from its App Store. It also asked which related third-party applications have been removed or rejected by Apple.

“Did Apple act alone, or in consultation with AT&T, in deciding to reject the Google Voice application and related applications?” the FCC wrote. “If the latter, please describe the communications between Apple and AT&T in connection with the decision to reject Google Voice. Are there any contractual conditions or non-contractual understandings with AT&T that affected Apple’s decision in this matter?”

“Please explain any differences between the Google Voice iPhone application and any Voice over Internet Protocol (VoIP) applications that Apple has approved for the iPhone. Are any of the approved VoIP applications allowed to operate on AT&T’s 3G network.”

IPhone users can use VoIP applications, such as Skype, only over Wi-Fi connections, not 3G.

Also in the letter to Google, the FCC asked it for information about the company’s approval process for its Android application store.

The letter asks Google to “provide a description of the standards for considering and approving applications with respect to Google’s Android platform.”

“What is the approval process for such applications (timing, reasons for rejection, appeal process, etc.)?” it states. “What is the percentage of applications that are rejected? What are the major reasons for rejecting an application?”

Consequences

The worst-case scenario for operators, and to a lesser degree application-store owners, would be if the FCC mandated that networks and application stores be open to any and all applications that met basic technical requirements. Although this wouldn’t be in their best interests, the FCC could decide that it’s in the best interests of customers.

The question could boil down to whether operators and application-store owners can convince the FCC that technical considerations are at the heart of their decision-making process when it comes to deciding which applications to allow and which to ban.

Whatever the outcome, the FCC’s response will determine how much control operators have over how their networks are used.