Is Apple killing competition in its App Store?

— Apple's iron-fisted control of the iPhone is starting to draw protests from some software developers who wonder if the company’s policy will end up squelching competition.

In at least one recent case, Apple appears to have denied approving a software program, Podcaster, for the iPhone, that could be considered competitive with the company’s own offerings or plans.

Apple not only makes the iPhone, but also controls its operating system and has absolute authority over what programs can be added to the device.

While there are thousands of phones from which to choose, the iPhone’s influence on the mobile market has been phenomenal in its short life. Its online App Store, which lets iPhone owners download software with a few clicks on the iPhone itself, has made its mobile platform extremely attractive to software developers.

After 15 months on the market, the iPhone is already the second top-selling smartphone in the United States, behind Research In Motion’s Blackberry. Even with this week’s introduction of Google’s Android operating system for cell phones, one that is open to almost anyone who wants to create programs for it, it will take a lot to best the best in show.

Apple also controls more than 70 percent of the digital music player market in the country with its iPod, which is also part of the iPhone. Apple’s online iTunes Store is also the leading digital music retailer in the nation, surpassing Wal-Mart earlier this year.

Podcaster lets iPhone users download Podcasts via the iPhone and eliminates the computer as an intermediary. Apple rejected the program for the App Store, part of the online iTunes Store, which delivers iPhone programs directly to the devices.

Duplication or competition?
Podcaster developer Alex Sokirynsky said he was told by Apple that Podcaster “duplicates the functionality” of the Podcast section of iTunes.

Another iPhone software developer, Fraser Speirs, said he believes there was another reason.

“Apple is now selecting for anti-competitive reasons,” he wrote on his blog. “An application that I really, really want was rejected by Apple because it replaces a feature in Apple’s own software.”

Nokia, the world’s largest phone maker, has practices similar to Apple in terms of top-to-bottom control, said Sravan Kundojjala, Strategy Analytics analyst on strategic technologies practice.

However, he said, Nokia “gives much more choice to developers. For example, it supports technologies that compete with its own. It supports Java, Flash, Silverlight in addition to its own Web Run-Time. This is not the case with Apple.”

Apple's controls over the iPhone may be unique to the mobile phone industry, but it is not in others, said Michael Gartenberg, vice president of mobile strategy at Jupitermedia,

“For example, with video games, Microsoft, Sony and Nintendo control exactly what content goes on their devices,” he said. “You can develop all you want, but if they don't publish the title, you can't get your content on their machines.”

Avi Greengart, Current Analysis research director for mobile devices, said what Apple is doing in terms of control is “not unprecedented. Perhaps it's unprecedented in terms of scope, because Apple has this level of control over the entire process.”

The App Store, launched in July, so far has more than 3,000 programs, ranging from games to finance. Some are free; others are for purchase.

No 'Pull My Finger'
Software developer Speirs also questions Apple’s rejection of another program, “Pull My Finger,” which features the sounds of flatulence, and was nixed because of its “limited utility to the broad iPhone and iPod touch user community,” according to an e-mail the developer said he received from the company.

Even as silly as the program sounds, Speirs wrote that Apple’s decision based on taste “is the first step to censoring for business advantage.”

Apple did not respond to questions about this issue. Last March, when the company announced it would allow outside software developers to create programs for the iPhone, CEO Steve Jobs indicated Apple would have final say over those programs. He cited applications dealing with pornography, or those with inadequate security, as the kinds of programs that would be rejected.

Some of the company’s actions since then indicate more restrictions may have been added.

There are still no voice-activated, turn-by-turn GPS programs that take advantage of the new iPhone’s GPS chip, for example.

In July, Dominique Bonte of ABI Research wrote in his company’s blog that navigation applications for the iPhone “have been held off by Apple up to now, presumably because they want to reap the profits of this killer application themselves.”

A spokesman for one GPS software maker said the company wanted to pursue such a program, “even though there were some specific clauses in the developer agreement (with Apple) that said you can’t write GPS navigation applications.”

When questioned about that in July, an Apple spokesman declined to comment.

Competition, criteria concerns
Said Greengart: “In some cases, it sounds like Apple is rejecting applications because Apple itself intends to write these similar applications, and doesn't want there to be overlap.”

However, he added, it’s hard to know the real reasons because Apple says so little about what it is or isn’t doing.

“The problem isn't that there are rules; the problem is that no one knows what the rules are, because Apple hasn't said what criteria it is using to reject applications,” he said.

Gartenberg believes Apple is going through “a bit of a learning process” in working with iPhone software developers, as the company tries to understand “what works, what doesn't and how to effectively ensure the quality of applications,” he said.

Software developer Speirs, whose “Exposure” program for the iPhone gives users access to all of Flickr’s photo-sharing Web site, said Apple needs to “publish clear and unambiguous rules for what will be accepted and what will not,” because developers are investing “time and resources” in their programs.

While there are issues, the App Store “is doing some incredible things” for mobile phone software programs, said Greengart. Among them, the store is “exposing consumers to the notion of downloading applications to their phones.

“From the consumer’s standpoint, which is very important to a developer, the App Store is the one place to go to get applications. The browsing experience is superb, as is the buying experience. Basically, you click and a program is yours,” he said.

And most software developers will “cope with Apple’s control” because of the financial returns they might see, said Kundojjala of Strategy Analytics.

Still, with some developers speaking out, there is a crack in the wall. Until recently, it was unusual for software developers to publicly share their frustrations about the iPhone software program.

Most are hesitant to do so, worried about hurting their own chances of success with Apple, and keenly aware of the company’s mania for secrecy and control.

“We’re talking about an ecosystem that in a few months had 100 million downloads of applications,” said Gartenberg. “Clearly, Apple is doing more right than wrong.”