The Flaw in the Calacanis Case Against Apple

One of my favorite tech personalities is Jason Calacanis, CEO of Mahalo.com. I always look forward to his visits to Leo LaPorte's This Week in Tech podcast because Calacanis never fails to make the discussion lively. Unlike so many in the tech spotlight, Calacanis isn't afraid to say what he thinks, even if he's all alone in his convictions. His bombastic style as a CEO and as an observer of the tech scene suits my tastes. I often agree with him, but I enjoy hearing what he has to say even when I don't agree.

So when he posted "The Case Against Apple - in Five Parts" at Calacanis.com, I dropped everything to read and digest what he had to say. Calacanis has been increasingly critical of Apple of late, sometimes with good reason. If he was ready to state his overall argument for his growing mistrust of a company he'd usually supported in the past, I was ready to hear his story.

Now that I have, I still think he's sincere and thoughtful in has assessment. But I also think he's basing much of his thesis on the same fundamental flaw in reasoning that invalidates the arguments used by so many Apple naysayers. I won't class Calacanis with the blowhards out there who know they are dealing from the bottom of the deck. This man has earned more respect than that. But he's wrong this time, and I can point out how and why.

The original post is well worth the reading, and I encourage you to click this link and do so if you haven't already. None of the charges he brings against Apple here are new, but they are stated here with more clarity and less special pleading than I have seen them in the past. I note that all five of his points involve the iPod/iPhone ecosystem, and I think that's an important distinction. The reason for most of the complaint here is not that Apple runs this side of its business so much differently than it runs the Mac side of things. Rather, it is because the iPhone and iPod have been so phenomenally successful that in these areas Apple is easy to cast as the villain. Indeed, it is no accident that so many parallels are draw throughout the posting between the Microsoft of yesterday and the Apple of today. But the cases are not at all parallel, and it is the critical difference that eludes Calacanis as it has so many others.

Calacanis charges Apple with five anticompetitive practices. Here they are, along with his "bottom line" conclusion:

1. Destroying MP3 player innovation through anti-competitive practices
2. Monopolistic practices in telecommunications
3. Draconian App Store policies that are, frankly, insulting
4. Being a horrible hypocrite by banning other browsers on the iPhone
5. Blocking the Google Voice Application on the iPhone

Bottom line: Of all the companies in the United States that couldpossibly be considered for anti-trust action, Apple is the leadcandidate.

Let us look at what is really meant by "anticompetitive". I think Calacanis would be the first to defend vigorous competitive effort in an open marketplace. Calacanis is a fierce competitor when necessary, but has always been smart enough to know when alliances are better than warfare. He would not expect Apple to throw away a competitive edge, and would probably call them traitors to their own stockholders if he caught them doing so. He instead seems to be accusing Apple of using a dominant market position as an unfair lever to stifle the efforts of others to compete fairly. Calacanis cites Microsoft and Google as companies that have drawn government interest for unfair competitive practices, and offers the opinion that Apple has — undeservedly — been given a free pass in this regard.

The case, however, doesn't hold water in any of the five areas, and the flaw in all five is basically the same.

Under charge #1, Calacanis says that Apple's refusal to allow open access to use iTunes software to feed and manage any and all MP3 players from any and all manufacturers is anticompetitive. He blames Apple's "lack of openness" for the lack of advanced features on today's crop of MP3 players, and says that people would be wholly outraged if Microsoft had made it so that the Zune was the only MP3 player compatible with Windows.

The Calacanis analogies don't hold up under scrutiny, however. Apple didn't make it so the iPod is the only MP3 player that will work under OS X. Indeed, iPod dominates among Windows users, and you can hardly say Apple had any way to keep competitors off of that computer platform. Nothing prevents any manufacturer from making an MP3 player with any set of advanced features they wish, and any MP3 player can be used on the Mac platform Apple controls (as well as on Windows) — as long as the manufacturer is willing to provide the user with Mac/Windows digital hub software that will support the player and those advanced features. Apple has done nothing to keep any such software from working in Mac OS X. But marketing an MP3 player is more than just creating hardware — it is providing a hardware-software ecosystem that works well. Calacanis wants Apple to relieve the competition of 2/3 of that burden, taking on the chore of keeping iTunes up and running for the benefit of everyone else's hardware. Apple would be foolish to do so.

What sells iPods is not just the iPod hardware — it is the iPod/iTunes ecosystem. I would be the first to says that iTunes needs a lot of improvements. As a media manager, it is still horribly flawed. If someone else can do better — let them! Apple can't stop that, and hasn't tried to do so. To make it, however, they will have to have the software run as well and be as easy to use as iTunes, and that's no going to be an easy task. A lot of whiners want to build cheap MP3 player hardware and let it ride on the back of Apple's expensive and hard-won position with iTunes easy-to-use interface. It is not anticompetitive for Apple to deny them the free ride.

Microsoft built the Zune, built the Zune software, and had the advantage of knowing all there was to know about making it work well with their own Windows product. The result? A truly laughable failure to even come close to challenging the iPod in a free marketplace. Why? Their ecosystem was just not as good at meeting the needs of the target audience as the iTunes/iPod combo.

So Apple is only "guilty" here of not doing the other MP3 player manufacturers' jobs for them, for free.

The second charge that Apple is engaged in monopolistic practices in telecommunications (with the iPhone) is similarly a misdirected charge. Calacanis says "AT&T is the suck" and the fact that you must use AT&T service to use an iPhone is monopolistic. This one is hogwash, and I'm frankly disappointed in Calacanis for falling for this old line of drivel. Oh, I agree that AT&T is "the suck" in many ways. I also agree that the practice of tying a particular phone to a particular carrier or set of carriers as a competitive practice is undesirable, and this sort of thing has stifled the growth of cell phone services in the US for years while growth of services has flourished in places like Japan. But Apple didn't create that situation her. Consumers have allowed a handful of carriers to collude and engage in consumer rape for a long time before the iPhone came along. The only reason that people are just now noticing is that, for the most part, all cell phone hardware choices sucked just about equally hard until the iPhone came along and made consumers realize that they deserved something better.

Suddenly, the focus was off what services you could eke out of your carrier with your crummy phone and onto a piece of hardware that made it worthwhile to care about what was hanging off your belt. AT&T sucks as a service provider — and all of the others suck, too, in various ways. But to get into the market, Apple had to make the iPhone work with some carrier. Now that the iPhone is a certified hit, every carrier would love to offer the iPhone, and that might eventually put Apple in a position when they can dictate some consumer-friendly terms to the industry at large. But the anticompetitive practices of the cell phone industry can't be laid at Apple's feet, any more than a TV set manufacturer can be blamed for the excesses of the cable TV industry. Those practices existed in the market when Apple entered it. Again, this charge by Calacanis is misdirected. Two down.

In charge #3, Calacanis takes Apple to task for not opening the App Store to any and all comers, and for "draconian" practices to eliminate apps that compete with Apple's own business offerings. I'll agree that there have been some inconsistent, unwise and just plain dumb decisions handed down in the history of the App Store approval process (and that process needs to be improved), but overall the idea of restricting the software available on the iPhone to approved offerings is a wise one.

Once again, analogies used by Calacanis to software use on personal computers don't apply. When the first personal computers were created (and no one knows more about that than Steve Jobs — he was one of the midwives at that birth), there was no "internet" — no personal computer networking of any kind. Personal computers and personal computer networks grew up together, facing the various opportunities and security pitfalls alike together. Meanwhile, cell phones and cell phone networks crew up side by side as well. But when the crossover point comes that merges the two comes(a point that is not exclusive to the iPhone, though the iPhone is the poster child for the movement, as it were), there is a danger that the less capable and complex protections of the cell phone network are not ready for the full brunt of the wild and woolly practices of the internet. Some care seems prudent.

Even so, this is not the only reason to restrict software on the iPhone. The truth is that the iPhone was never intended to be the sort of wide-open platform that the personal computer is, nor should it necessarily become so. Most of the audience for the iPhone does not want or need to stick a full-blown personal computer into their pocket — along with all the vulnerabilities and operational complexity that implies. Above all else, the iPhone/iPod Touch experience needs to stay accessible and simple to the average person. The App Store vetting process needs to be smoother and more fair to developers, and Apple will learn how to make it so over time. Like most new ideas, it has some shaking out time to go through. But Apple wants to keep some hand in seeing that what gets to the iPhone platform is at least marginally consistent and a truly open software market would make that impossible. There will be those consumers who want the wild and woolly experience in their pocket (woo!) and if so, there will most likely be plenty of other devices they can buy that will allow this. But for those of us that want something that just works, there's this set of devices from Apple. The market will decide. and there's nothing anticompetitive about Apple deciding which kind of device they want to sell, and the market deciding which one they want to buy. Want an utterly open source phone — go with Google's platform instead. It's your nickel. But there's nothing here to interest the anti-trust boys either as long as anyone can play the game. Three down.

On charge #4, I've got some sympathy with the prosecution, but only to a point. Having Safari Mobile as the only approved iPhone browser seems a little overprotective on Apple's part, at least from where I sit. I think that Apple may not trust their own approval process here, at least not yet. There are SO many ways a browser can go wrong because there are SO many web pages out there that it has to deal with. Microsoft's IE is a great example of what a poorly designed browser can do to the platform on which it runs. The iPhone is intended as a walled garden to protect the largely nontechnical audience that uses it, and Apple is — perhaps wisely — hesitant to install too many doors into that garden. They have to take responsibility for what gets through Safari Mobile as the gateway to the web — and to make sure that it integrates well with every other iPhone app that potentially calls on it. They may not be ready to guarantee that for something else as well. Still, I'd like to see a situation where multiple browser developers are free to push each other to improve, as Firefox, Safari, Opera. etc. have pushed each other in personal computer browsers.

Calacanis loses me entirely, however, when he trots out yet another inept (or, rather, "non-apt") analogy. There is no comparison between the anticompetitive use of IE in Windows and the bundling of Safari as the only browser available on the iPhone. The problem with the way IE was used anticompetively in Windows was not with the browser but with the way Microsoft unlawfully bullied independent hardware manufacturers into including IE and only IE on their hardware products. Microsoft used unlawful coercion to force hardware makers to offer IE exclusively. If the hardware manufacturer had freely chosen to do so, that would not have raised any anti-trust eyebrows. In this case, Apple IS the hardware manufacturer, making the free choice to offer just one browser. Any other hardware manufacturer in this space can make a different choice. The market will decide. That is fair, and that is four down for Calacanis.

The final charge by Calacanis involves the removal of Google Voice apps from the iPhone. It seems obvious that voice apps using the iPhone should receive scrutiny at the highest level, if it is given that Apple wants to keep the iPhone experience controlled and usable by the average person. After all, voice communication is what a phone is designed to do. Should the way this is handled be a matter of great interest to the consumer choosing a phone? Yes, of course. Is it a matter for government scrutiny? Not under any current law I am aware of! Once again, it is not illegal to prevent a competitor from piggy-backing on your product. I would urge Apple to do so consistently, and to weigh consumer satisfaction against a desire to profit directly from all aspects of the iPhone ecosystem. Indeed, if Apple can leverage the iPhone's overwhelming success enough to force the various carriers to treat consumers more fairly, I would expect this space to be opened up considerably in the future. If data communications by cell carriers can be freed of the stupid ways they have run things as voice carriers, the need for the iPhone and iPod Touch to be two different devices may go away altogether and you could install anyone's phone application on your device to run across whatever data carrier you choose. But that day has not (quite) arrived yet. Apple is probably as anxious to see that happen as we are.

Calacanis cites the defection of Michael Arrington of TechCrunch and Peter Rojas of GDGT.com as indicative of Apple's wrong choices, and I suppose we can add Calacanis himself to this list now as well. That is fine for them, making a free and individual choice. But just because what Apple has chosen to do is not what they want is not evidence that Apple has dome anything illegal or even unwise in the overall scheme of things. If these people need a more open platform, they should seek and support one — and nothing prevents them from doing so. Five down.

The flaw in all these cases is thinking of the iPod/iPhone platform as the only game in town. It isn't, and should not be. People should be, and are, free to choose what they want in a hardware device and the associated software platform. For years, I chose to use a Mac when that choice meant I could not run a lot of Windows-only software I would have liked to have. I chose this because, overall, the Mac experience — while more limited in some ways — offered me more of what I wanted. The same is true of the iPod and iPhone today. Many choose to use them because the overall experience is right. Forcing Apple to accept as part of that experience anything anyone wants to throw at them will not improve that experience. This market doesn't need government regulators to drag Apple down. It needs consumer pressure to force everyone else to make their products more attractive than what Apple is offering. That forces everyone in the industry to get better at what they do.

I encourage Calacanis to stay on Apple's back and encourage them to be better. But don't forget to encourage everyone else to work just as hard to make what they create at least as good as what Apple provides. Apple leads because they have what people want to buy, not because people are forced to buy what Apple provides.

UPDATE: Another excellent rebuttal to Calacanis is at http://www.zerologic.com/Blog/The-Case-Against-Apple-My-Rebuttal.html by Michael Sitarzewski.


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  • 8/9/2009 11:29 AM Tom B wrote:
    The idea of a company like Apple, with miniscule market share, being a monopoly is absurd. Moreover, one assumes antitrust laws are in place, on some level, to protect consumers. If so, I'm glad the DoJ took MSFT to task for ADMITTEDLY (in E-mails) trying to kill Netscape, Inc. by bundling IE. Not because I have any fondness for Netscape, Inc., but because I have never found a MSFT product I would rate as better than marginal. IE 3 for Mac was perhaps the best product MSFT EVER released, and it only looked good because Netscape 4 was a mess, due to rapid code changes.

    There was a real danger for a while of MSFT wiping out Apple; establishing proprietary standards on the WWW and even controlling the living room (they had a grand vision of renting movies through the XBox). Now MSFT has been "de-fanged" and is being run by a grouchy bumbler, I think Apple's future is bright, and this makes me happy.
    Reply to this
  • 8/9/2009 1:10 PM Viswakarma wrote:
    Comparing Apple with Microsoft is like comparing Horse with an Ass!!!
    Reply to this
  • 8/9/2009 2:44 PM Joe W wrote:
    Apple's actions to limit competition is all over the place. It would be the same as saying if you buy a Ford you can only use Shell gas. Or if you buy a Sony 8 track player you can only use RCA tapes. Apple is very anti-competitive.
    Reply to this
    1. 8/9/2009 3:12 PM Guy McLimore wrote:
      MORE inept analogies?

      In point of fact, Ford would be perfectly free to build a car that ran only on Chanel No 5 if they were silly enough to do so. (No, that would be more likely to be GM.) It wouldn't be anticompetitive in any legal sense -- just stupid. 

      You buying many 8-track players recently? Wow, and I thought I was old. As it happens, Sony's Betamax video recorders only used Sony-supplied media. Again, not illegal or even immoral. Just dumb. (Sony has managed to snatch defeat from the jaws of victory more often than any tech company in history. This is the company that OWNED portable music players during the Walkman generation. How they let the MP3 player market get away from them is a classic object lesson in greed, stupidity, and cut-your-nose-off-to-spite-your-face stubbornness. But I digress.)

      I think the inapplicable analogy is a tech meme we need to retire right now -- preferably with a bullet in its tiny brain.

      Reply to this
  • 8/9/2009 4:07 PM JW wrote:
    Apple's actions are mostly focused on building and managing a platform, not limiting competition - competition, which comes from other manufacturers who are also free to invent, build and sell whatever they want to. There are 60,000 third party apps and growing at 1600 a week - hardly locked down and without choice, just not always every and any choice, without regard for functionality or security.

    Apple is one of the few companies who actually are capable of building a front to back platform, incorporating hardware and software. The Windows PC "accident", where one company provides software and a collection of other companies builds hardware, is the exception, not the rule, much to Microsoft's recent disappointment.

    If you want complete "control" of an iPhone, go ahead and jailbreak it, or better yet, wipe it and install Linux and write your own software.
    Reply to this
  • 8/9/2009 4:20 PM Darrick R wrote:
    One the first point attempt by this "Jason Calacanis" (sorry, I have no idea or care who he is), it seems that most people are not old enough to remember (or actually do any real research about) the fact that the iPod was developed for Mac people first and only. There were quite a few MP3 player around before, but if you used a Mac, you were locked out from using them because thee manufacturers refused to write any support software for MacOS to actually use their devices. It wasn't as simple then to "drop mp3's onto a icon to load, etc. In fact, whenever a Mac user would call or write for help with the matter, they would get the standard smart-ass reply to "buy a PC" from some sad Windows geek. Mac users finally had a couple choices for independent MP3 software later on, which included the excellent Soundjam program - which Apple purchased and made into iTunes.

    And guess what? Itunes and Ipods became a huge hit with Mac users, so Apple (wisely) extended that to PC users immediately, which made it the Juggernaut it is today. Which leaves us with whiners like Mr. Jason Calacanis trying desperately to make Apple appear as purposely criminal like Microsoft of the '90's.
    Reply to this
  • 8/10/2009 6:22 AM reader wrote:
    The main problem with IE was that Microsoft introduced a lot of proprietary technologies/additions along the way. This was effectively blocking competition because there were (and still are) so many pages that require IE. Then, Microsoft tried to lock down the whole web-development process to Windows, to push all clients to Windows (e.g. ActiveX does not run on mac or Linux, they even tried to break Java interoperability, to make Java a Windows-only technology) and towards Windows server/Microsoft IIS. Apple is pushing technologies based on open standards. No one can install their browser on the iPhone, but Mobile Safari does not require specific/non-standard content so any other desktop PC or mobile phone can work with those pages. Also, the designers can choose the tools and platform to work on.
    Reply to this
  • 8/10/2009 7:19 AM Sean wrote:
    OMG, what will I do now that Apple has been labeled as anti-competitive by a few over zealous tech writers with nothing better to do with their lives?... Move to a PC?

    Not in a MILLION years!!!!

    Nearly 70,000 Apps and one gets rejected and it's the end of the world. How will they ever survive? And they are willing to move to another platform like the Pre with only what, 20 Apps? Does this make since to you?........Can you say Autistic?

    Too funny. :o)

    Let's get real here people. Just because someone's favorite App got nixed for what ever reason does not mean the whole ecosystem is broken or flawed. To use someone's analogy, would you buy another car simply because you hated the tires it came with?

    Why are we even talking about this? It must be a slow day for us all.
    Reply to this
  • 8/10/2009 12:46 PM MD wrote:
    Very good rebuttal; although Re #4, the critique is even easier: Apple doesn't ban third-party browsers (see iCab Mobile), and Opera wasn't rejected.
    Reply to this
  • 8/10/2009 4:02 PM Matthew M wrote:
    I hate to be one of those "I totally agree", uh…guys, but in this case I really do agree whole heartedly. I too find Jason Calacanis to be a knowledgeable, interesting and amusing "tech personality" (especially on TWiT), and I also think he went off the rails on this one. I understand his frustration, and I too would like to see a better "deal" for consumers and developers in mobile technology. But change takes time, and the entrenched interested have a great deal at stake. The iPhone's success has already done a lot to shake up the industry, and as time goes by I think it will continue to do so. In the meantime, people can get an Android or Pre if they like, but as Leo Laporte succinctly put it "I want it to work!" Which is why he's gone back to the iPhone from both, and why I never left.
    Reply to this
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