Google CEO: EU Decision Could ‘Upset’ Android’s Free Business Model

Google chief Sundar Pichai issued a thinly veiled warning Wednesday that the European Commission’s finding of anti-competitive practices by the Internet giant with regard to Android could spell the end of the operating system’s free distribution.

The European Commission announced a record-breaking $5 billion fine against Google, saying the company violated EU laws by requiring smartphone manufacturers to pre-install the Google Search app and its Chrome browser, limiting rival search engines. Google also “made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices,” the commission stated.

Google said it would appeal the decision.

In a blog post after the EU’s announcement, Pichai said that free distribution of the Android platform and Google’s suite of applications benefits not only manufacturers and operators but also app developers and consumers. He hinted that the commission’s ruling threatened the viability of that business model.

“So far, the Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model,” the Google CEO wrote.

Pichai disputed the commission’s allegation that Google requires Android licensees to pre-install its apps. “Phone makers don’t have to include our services; and they’re also free to pre-install competing apps alongside ours,” he wrote. Device makers can use or modify Android “in any way they want, just as Amazon has done with its Fire tablets and TV sticks.”

After the EU fine was announced, shares of Alphabet, Google’s parent company, rose slightly in early trading Wednesday but were down 0.3% by 10 a.m. ET. Alphabet reported $110.8 billion in 2017 revenue; the EU fine represents 4.5% of that.

Google has invested “billions of dollars” in Android since it began offering the operating system for free in 2007 to phone makers and mobile network operators, according to Pichai. “This investment makes sense for us because we can offer phone makers the option of pre-loading a suite of popular Google apps (such as Search, Chrome, Play, Maps and Gmail), some of which generate revenue for us, and all of which help ensure the phone ‘just works,’ right out of the box,” he wrote.

The European Commission’s decision “sends a troubling signal in favor of proprietary systems over open platforms,” Pichai wrote. “The decision ignores the fact that Android phones compete with [Apple’s] iOS phones, something that 89% of respondents to the Commission’s own market survey confirmed.”

According to Pichai, there are more than 24,000 Android devices currently in the market from more than 1,300 different brands, including from smartphone manufacturers across Europe.

Android phones typically come pre-loaded with up to 40 apps from multiple developers, according to Google. Last year, more than 94 billion apps were downloaded from the Google Play app store worldwide; that includes browsers such as Opera Mini and Firefox, which have been downloaded more than 100 million times, and the UC Browser, which has been downloaded more than 500 million times.

The commission said that about 80% of smart mobile devices in Europe and worldwide run on Android.

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