By Mark Jamison

The “Open App Markets Act,” introduced in the Senate last week, is the latest salvo against Americans who enjoy iPhones and Android phones. Other volleys have been from video game maker Epic Games, the European Union (e.g., here and here), several state attorneys general, and antitrust bills already being considered in Congress. Like these, the new proposed legislation is an example of policymakers mistaking great products for market power.

Since Apple introduced the iPhone in 2007, it and Google
have led the world in smartphone technologies. Consumers so value these
products that their introduction accelerated mobile broadband adoption by 60 percent. Absent
this acceleration, there would be 4.8 billion fewer mobile broadband
subscriptions worldwide (and 285 million fewer in the US). Imagine the
difficulties for the 285 million Americans who might not have had their iPhones
and Android devices during the pandemic. (My estimates assume smartphone
markets would have continued on their pre-iPhone trajectories.)

Despite these impressive impacts, the bill’s sponsors — Sens. Richard Blumenthal (D-CT), Amy Klobuchar (D-MN), and Marsha Blackburn (R-TN) — have concluded that Apple and Google are “wielding incredible power,” denying “startup tech companies a fighting chance,” and engaging in practices that are “a direct affront to a free and fair marketplace.” Facts say otherwise.

In our recent AEI working paper, Tejaswi Channagiri Ajit and I examine startup businesses’ choices to use Apple’s iOS platform, Google’s Android platform, or neither — or both. Of the 47 business categories we studied, 16 were associated with firms that exhibited a strong preference for using mobile platforms. Most viewed iOS and Android as clear substitutes or at least complements, implying that Apple and Google are in competition for these startups’ business. Companies that had clear preferences between iOS and Android tended to be lukewarm on using mobile platforms altogether, also implying no market power.

The facts also indicate that the app economy built on these platforms is vibrant and robust, in direct contradiction with the senators’ claims. Tejaswi and I found that growth in US startup businesses accelerated rapidly once Apple introduced the iPhone. Likewise, the tech entrepreneurship association Engine found that seed and angel funding for startups has grown from $500 million to over $9 billion since the introduction of the iPhone.

These platforms’ contributions to the economy accelerated during the pandemic. According to App Annie, the number of app publishers receiving more than $2 million in revenue increased 25 percent in 2020. Also during 2020, the amount of capital flowing into app companies increased 27 percent, and Americans’ use of finance-related apps increased 90 percent.

These growth statistics contradict the senators’ market-power assertions. Market power is the ability to raise prices and suppress output without inviting more competition. Apple and Google appear to be encouraging growth, not suppressing it. And their fees appear on par with platforms.

Ironically, the legislation would damage the value consumers
receive from Apple’s and Google’s platforms. The legislation would, among other
things, require the companies to permit third parties to install their own app
stores, allow users to bypass app stores, and permit third-party payment
systems.

These requirements damage consumers in part because they run counter to what consumers want. Google allows some of activities the bill would require — including app store “sideloading” — but Apple does not. And Apple’s customers seem to prefer it that way, as do some app developers. Google caters to techies, while Apple serves people who love their slick, easy-to-use devices. The act would make iOS more like Android and, in doing so, would damage the people-oriented technology leader that Steve Jobs created.

The legislators and others that want to redesign Apple’s and Google’s systems appear to embrace an illusion that Thomas Sowell says plagues those he calls “the anointed.” According to Sowell, when such people observe systems that “are not as wisely crafted as the anointed would have crafted them,” the anointed conclude that they should impose their vision on others, not realizing their lack of knowledge will make things worse.

(Disclosure statement:
Mark Jamison provided consulting for Google in 2012 regarding whether Google
should be considered a public utility.)

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