FCC Investigates Apple's Rejection of iPhone App

| by Reason Foundation

How awesome is the iPhone? As a proud owner—I camped out overnight to get 2008's 3G model—I'll vouch for its addictive niftyness, and admit that I often find myself wondering how I ever got through a day without one. Between the intuitive touchscreen interface and the endlessly delightful App Store, in which one can buy everything from games to GPS solutions to dictionaries to softcore porn, the iPhone's made my life richer, more entertaining, and more hassle free.

Others might dissent, but it would be difficult deny that since Apple's entry into the mobile phone market in 2006 the world of wireless networks and gadgetry has become more innovative, more competitive, and way, way more cool.

Naturally, the Federal Communications Commission is worried.

Why? Because the FCC thinks Apple might not be running its business fairly. Last week, Apple officially rejected the Google Voice Application, a widely praised, multi-use calling application that, according to Wired magazine, "lets users route all of their phone calls through a Google number, giving them cheap overseas calls, text translation of voicemail, per contact call routing rules, phone recording and free text messaging, among other features."

Apple, as proprietor of the App Store, made the formal rejection, but it's unknown if the decision was a result of pressure from iPhone carrier AT&T. Given AT&T's interest in protecting the calling side of its business model, as well as the fact that AT&T previously told the Wall Street Journal it feels "no obligation to facilitate or subsidize our competitors' businesses," such pressure is certainly plausible.

Now the FCC wants the whole story. Last week, it sent an abrupt letter to all three companies—Google, Apple, and AT&T—demanding answers. Why the rejection? Was AT&T involved? Is this normal? What are Apple's usual policies for rejecting an app?

A better question, however, might be why the FCC is sticking its nose into this business at all. As Jerry Brito of the Mercatus Center and Adam Thierer of the Progress and Freedom Foundation recently pointed out, it's not clear that the agency has any authority to do so. Not that that's stopped it before: As Thierer notes, the FCC has a long history of overreach. This may simply be a way of flexing its regularity muscle as its defines—and perhaps expands—its territory under the Obama administration.

In particular, this might be a signal that the FCC plans to pursue a more aggressive stance on wireless regulation—or that it may be picking up some ideas that should have long been relegated to the dustbin.

In 2007, Columbia University law professor and tech-theorist Tim Wu, who famously coined the phrase "network neutrality" to describe his vision of an open, equal network, wrote a paper arguing for "increased public scrutiny" of wireless phone networks, implicitly making the case for network neutrality in the wireless phone market. Wu worried over the prospect of a world in which not every wireless device would connect to every wireless network. And with phones as supremely nifty as the iPhone, wasn't that a tragedy?

What Wu missed, of course, was that closed networks would promote competition. Given the iPhone's instant popularity, it seemed likely that Verizon, T-Mobile, and Sprint would all work overtime to create similarly cool, popular devices. And they have. These days, consumers looking for phones with touch screens, or music and video capabilities, or GPS, or a variety of downloadable apps have numerous options on multiple networks. Rather than kill innovation by limiting the iPhone's uses, closed networks have spurred technological developments, with the participants racing to outdo each other.

Wu's paper caused a stir in the tech-policy community, but fell on deaf ears in the Bush administration's FCC. With the change to the more net-neutrality-friendly Obama administration, however, Wu's ideas may gain some currency.

That's too bad: The iPhone, the App Store, and the various eager competitors behind numerous other slick, hand-held wonders have done just fine without the meddling of Washington bureaucrats. When it comes to making the wireless world more awesome, my money's on Apple over the FCC every time.