Apple’s new subscription service – an anticompetitive problem?

Apple’s new subscription system is a really dangerous move by Apple. It has the potential to be anticompetitive, and to allow Apple to compete unfairly on pricing against direct competitors in the markets of hardware, software and content. Here’s an example of how:

Spotify is installable on a range of devices, and comes pre-installed on HTC devices.
Currently you can subscribe to Spotify in the UK and access it on your smartphone via their website by signing up for £9.99 on their website.
If they want to continue being able to do this for iPhone users, they now have to offer the ability to subscribe directly from the iPhone app, and when someone does this give 30% of that to Apple.

So now, instead of taking £9.99, Spotify now take £6.99 and Apple take £3.00.
In order for Spotify to maintain their take at £9.99 for a subscriber via the iPhone, they have to increase their price by 43% to £14.29. This means Spotify gets £9.99 and Apple now get £4.30

But maybe you don’t use an iPhone. You use an HTC handset with Spotify pre-installed on it and you’ve been really happy with your experience at £9.99

Spotify can’t sell you access for £9.99 though, because Apple insist that prices have to be the same or less as access via other platforms. So now, as an HTC user you now HAVE to pay £14.29 in order to get exactly the same access that you used to have for £9.99 directly because of Apple’s pricing clause.

HTC and Spotify, or Spotify or any hardware manufacturer for that matter… In fact, Spotify or any mobile phone provider cannot put together a pricing deal for free access for a few months to its service. 3 in the UK offer 3 months free Spotify access for contract holders with some of their devices. This offer could be interpreted to clash with Apple’s same price or less clause for iOS apps. Spotify could by Apple’s terms, have to offer the same deal for iOS users.

Then of course, Apple could finally launch their cloud access to your music on iOS devices after they purchased Lala. They could price it at £9.99 themselves, and negotiate better margins than Spotify have for access to content due to their sheer size and power in music sales. They take 100% of that £9.99 charge, but they’re forcing Spotify to charge more to get the same take, or forcing them to earn less money per transaction than Apple to compete on price, and Apple gets a cut of that too!

I can’t see Apple getting out of this one without someone, somewhere getting involved. I’m looking at you, European Union…

Advertisements

eBook Price Fixing concern

Amazon Kindle

Amazon Kindle

I have written a letter to the OFT, Tom Watson MP, my local MP John Spellar and influential journalist and author Cory Doctorow about the new price fixing occuring in the book business. I have included this below.

 

Dear Sir/Madam,
In August 1994, The Office of Fair Trading successfully applied to the Restrictive Practices Court to end what was known as the “Net Book Agreement”. Under this agreement, book sales and retail pricing figures were set by the publisher, rather than the retailer and allowed the publishing industry to essentially price-fix books as they saw fit. the OFT took the agreement to the Restrictive Practices Court, and in 1997 they ruled it illegal. This ended the practice of publishers setting the minimum price that a book could be sold at retail, and left the practice of price setting only up to the retailer.

This week, Amazon have been forced to fix the prices of their electronic book store under an agreement that the publishers call the “agency model”. Up until this week, only Apple were operating under this pricing structure in the UK with their iBooks platform. Unfortunately Amazon have now been forced to accept this model or to no longer continue selling the books to the public. This has forced the prices up, with books now being tagged on Amazon as “This Price was set by the Publisher”. This publisher based price setting has not only increased the prices at Amazon but has fixed the prices across platforms (Apple’s iBooks, Amazon’s Kindle), and stopped Apple, Amazon and other companies being able to price products they are selling as they see fit. The prices have also increased beyond the prices of their hardback equivalents, which is going to do nothing but encourage the piracy of the digital content, rather than encourage strong positive sales. In a world where we are being asked to become more energy efficient and better protect the environment I find it disgusting that my investment in electronic books in order to be a better, more environmental citizen has been punished by the greed of the publishers deciding to price fix electronic book mediums to suit their pricing desires instead of allowing retailers the freedom to be able to price goods as they see fit.

I implore you please, to do anything you can with your powers, influence and/or ability to raise this issue wherever you can, and to help stop this incredibly anti-competitive practice, which is nothing but damaging to the consumer.

My kindest regards,
Paul Kerton

This email has been sent to the following:
Tom Watson MP, The Office of Fair Trading, John Spellar MP (via his Westminster Office Secretary) , Cory Doctorow

BT Infinity, advertising a long wait

[picapp align=”left” wrap=”true” link=”term=British+Telecom&iid=5779256″ src=”http://view2.picapp.com/pictures.photo/image/5779256/general-view-british/general-view-british.jpg?size=500&imageId=5779256″ width=”380″ height=”253″ /]BT is currently rolling out advertising for its “BT Infinity” product which launched in January of this year, advertising broadband speeds of up to “40 Megabit” coming to your area soon. Except, it isn’t really is it. BT are rolling out their new fibre optic network as part of their move to faster internet connections, and ultimately the promise of delivery of products like BT Vision being entirely IP based, instead of using a combination of Freeview and on demand products.

Of course, BT Infinity’s advertising isn’t quite so honest about what we’ll be getting. By 2012, when their rollout will be “completed”.  By the end of summer 2011, 4 million premises will be able to get onto the service. By 2012, they plan to cover 40% of the country, 10 million homes, with their new fibre optic system. So by Summer 2011, 15% of the country will get the service. Not really “coming to my area soon”.

The vast majority of this system will be connecting the fibres to those green boxes you see at the end of the street, meaning the last part of your connections journey will be via your traditional copper cabling, so its not a true fibre optic network (Its a start, but its not their yet)

So I decided to check what exchanges in my area (the West Midlands) will be enabled. I found a list from Broadband Choices, and what I saw showed that its plainly obvious, that the ten million homes will mostly be in London, The South East, and middle class parts of the country.

London
Acton, Addiscombe, Balham, Battersea, Bayswater, Beckenham, Beulah Hill, Bexleyheath, Bowes Park, Brixton, Bromley, Catford, Chelsea, Chessington, Chislehurst, Chiswick, Clapton, Clerkenwell, Colindale, Cricklewood, Crouch End, Croydon, Deptford, Dulwich, Ealing, Earls Court, Edgware, Feltham, Finchley, Forest Hill, Fulham, Gants Hill, Gipsy Hill, Golders Green, Goodmayes, Grove Park, Hackney, Hammersmith, Hampstead, Harlesden, Harrow, Hayes, Hayes Common, Hendon, Hounslow, Ilford Central, Ilford North, Isleworth, Kensal Green, Kentish Town, Kenton Road, Kidbrooke, Kingsbury, Kingsland Green, Kingston, Kneller Hall, Lee Green, Leytonstone, Lords, Lower Holloway, Maida Vale, Malden, Mill Hill, Mortlake, New Cross, Nine Elms, Norbury, North Cheam, North Edgware, North Finchley, North Wembley, Northolt, Northwood, Palmers Green, Perivale, Pimlico, Pinner, Poplar, Primrose Hill, Purley, Richmond Kew – Surrey, Romford, Ruislip, Rushey Green, Sanderstead, Shepherds Bush, South Clapham, South Harrow, South Kensington, Southall, Southwark, Stanmore, Stratford, Streatham, Surbiton, Teddington, Thornton Heath, Tulse Hill, Twickenham, Upper Holloway, Upton Park, Uxbridge, Vauxhall, Wallington, Walthamstow, Walworth, Wandsworth, Wembley, West Drayton, West Kensington, West Wickham, Willesden, Winchmore Hill, Worcester Park.
South East
Abingdon, Aldershot, Alton, Amersham, Ascot, Ashford – Kent, Ashford – Middlesex, Bagshot, Banbury, Beaconsfield, Bearsted, Blackwater, Blue Bell Hill, Bordon, Botley, Bourne End, Bracknell, Brighton Withdean, Brookwood, Burgess Hill, Burnham – Buckinghamshire, Camberley, Canterbury, Chesham, Copthorne, Crawley, Crowborough, East Grinstead, Egham, Farnborough – Hampshire, Farnham, Fleet – Hampshire, Gerrards Cross, Godalming, Gravesend, Guildford, Haslemere, Haywards Heath, Headington, Herne Bay, High Wycombe, Holmer Green, Horley, Horsham, Marlow, Milton Keynes, Molesey, Newbury, Oxford, Penn – Buckinghamshire, Portsmouth North End, Pound Hill, Reading Central, Ringwood, Sevenoaks, Shenley Church End, Slough, Southwater, Staines, Summertown, Thatcham, Tilehurst, Tonbridge, Totton, Tunbridge Wells, Twyford – Berkshire, Uckfield, Walton-On- Thames, Wantage, Waterlooville, West Malling, Winchester, Windsor, Winkfield Row, Woking, Wolverton, Woodley – Berkshire, Yateley.

Now, lets compare that with…

West Midlands
Berkswell, Bromsgrove, Burntwood, Cheslyn Hay, Droitwich, Evesham, Fazeley, Fernhill Heath, Heath Hayes, Knowle, Leamington Spa, Lichfield, Polesworth, Rugby, Stratford-On-Avon, Worcester, Worcester St. Johns, Worcester St. Peters.

So basically, if you’re in the South or a middle class area, where there are only one or two exchanges to cover your town, you’re in luck. If you live somewhere like I do, where there are 5 exchanges just to cover my town, then you’re in absolutely no luck. The best part of this? Most of these areas are already very well covered with fibre optic connections via Virgin Media.

So now those in Virgin areas finally get a choice of 2 fibre optic providers. Those who don’t live in Virgin Media areas, or aren’t lucky enough to be able to have a job that simply involves meetings, and passing down your work to other people to do, then you can stay with your inadequate pure copper connection where if you’re really close to the exchange you can get up to 10-20Mbit. If you live more than half a mile away you’ll be lucky to get 8. Hey, if you live in a rural area, you’ll get 2Mbit maximum, and probably no choice other than BT for your connection. Lets not forget a pigeon just beat a rural BT ADSL broadband connection in delivering a video to a town 120km away. Competition gives us choice, reduced prices and fairness does it? Thanks capitalism for being so fair.

%d bloggers like this: