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Do App Gatekeepers Hurt Users?


Verizon’s moves to block the Google Wallet app from its newest phone raises the question whether the gatekeepers of smartphone content are out to protect consumers or stave off competition.

Google alleges that Verizon is refusing to allow the shopping app Google Wallet on the new Galaxy Nexus, a smartphone jointly created by Google and Samsung, The Wall Street Journal reported Tuesday. The app aims to make shopping more convenient for consumers and allow Google to tap into the local-business advertising market.

Fewer apps means less competition and higher prices, experts say. “Everyone is jockeying for position,” says Dennis Moroney, a research director at consulting firm Tower Group. “ If an app can be displaced or at least delayed it works to the advantage of the competitor. But that tends to drive prices up for the ultimate user of these apps – the consumer.” He says the free market has long been proved to be the most successful for making and delivering the best products, and also at the lowest prices.

To be fair, it’s not just the cell phone companies dictating what apps can be used on their phones, analysts say. Apple has kept tight control on the kind of apps that the iPhone will carry. With 500,000 apps on its iTunes store, Apple is still the clear leader when it comes to apps, compared to an estimated 320,000 for Android. However, many Android apps and games are still not available on iPhone, and Google, like Apple, regularly removes apps from its Android operating system.

Verizon, Apple and Google have said they block or delete apps because of inappropriate content and viruses. Some apps – like Price Check by Amazon –are available on both Android and iPhone. Scott Sutherland, senior analyst at Wedbush Securities, says carriers won’t ultimately be able to control apps: “They have never been overly successful with a walled garden approach so it’s hard for them to control the user experience,” he says.

Google spokesman Randall Sarafa says Verizon asked Google not to include this functionality in the product. However, Verizon Wireless spokesman Jeffrey Nelson says Verizon does not block applications. He says that, unlike ordinary apps, Google Wallet needs to be integrated into a new, secure and proprietary hardware element in our phones. “We are continuing our commercial discussions with Google on this issue,” he says.

Experts don’t see the battle for app-happy consumers easing soon, but they say this is typical for any kind of new technology. “We’re going to see more of this because the size of the market is so huge,” Moroney says. “Of course, initially it doesn’t always play well for the consumer.“ Moroney and Sutherland believe that prices for apps and other cell phone services like iTunes and Amazon Prime will fluctuate over the short-term, but Moroney adds, “Competition tends to normalize pricing in the long run.”


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