Contents
Introduction
In a groundbreaking move on June 16, the Digital Market Competition Headquarters of the Japanese government unveiled the “Competition Assessment of the Mobile Ecosystem Report.” This article delves into the key aspects and implications of this report, exploring how it signals a significant shift in Japan’s approach to regulating the mobile ecosystem. The unveiling of this report marks a pivotal moment in the ongoing global conversation surrounding digital market competition, with Japan taking a proactive stance in addressing the dynamics between major tech players, app developers, and end-users.
The Challenge to Apple’s App Store Monopoly
The report addresses concerns surrounding the safety of citizens’ smartphones by advocating for the ability to distribute apps from sources other than Apple’s App Store on iPhones.
In this report, the Digital Market Competition Headquarters urges Apple, the distributor of popular devices like iPhones, to allow the distribution of apps from sources beyond the App Store.
Global Perspectives on App Store Fees
Internationally, particularly in Europe, voices have risen, criticizing the exorbitant fees associated with the App Store. The call for introducing competition to lower transaction fees has gained momentum. While Europe is on the verge of formalizing regulations, the actual implementation is scheduled for March 2024, leaving the potential impact uncertain.
The United States experienced a similar discourse momentarily, but it has faded into the background. Surprisingly, Japan stands out as the only country aggressively pursuing early implementation.
Unveiling the Risks of Non-App Store App Distribution
Why is distributing apps through channels other than the App Store considered risky? Apple subjects apps to rigorous scrutiny to ensure privacy protection and prevent the extraction of users’ personal information during the distribution process.
In response to Apple’s stance, the Digital Market Competition Headquarters proposes that Apple should assess app distribution stores created by third parties. However, this approach introduces additional costs in the form of “review fees.” If third-party entry incurs expenses, these fees may be added to transaction costs, negating the anticipated reduction in total transaction fees.
The envisioned benefit of lowering transaction fees by welcoming third-party app distribution stores appears to be more of a mirage than a reality.
Balancing Safety and Development Costs
To enhance app safety, the Digital Market Competition Headquarters suggests that app developers undergo vulnerability assessments. However, external vulnerability assessments can be costly, ranging from hundreds of thousands to millions.
Even if third-party app distribution stores offer lower transaction fees, the potential additional cost for vulnerability assessments may dissuade app developers from submitting apps to these platforms.
The appeal of Apple’s App Store lies in its streamlined processes and worldwide reach without incurring such expenses, making it a preferred choice for app developers globally.
Divergent Views on Payment Systems
The Digital Market Competition Headquarters advocates for the adoption of payment methods beyond Apple’s provided billing system. Furthermore, they argue that if app developers opt for alternative payment systems, Apple should refrain from levying transaction fees.
In contrast, Apple contends that the seamless integration of app downloads and payment systems allows for efficient user interactions, including hassle-free refunds. They argue that such coordination would be challenging with separate billing systems.
Assessing Existing App Stores: Amazon, Samsung, Huawei, and More
The recently released “Competition Report (Draft) on the Mobile Ecosystem” paints a comprehensive picture of the digital market, covering app distribution, operating systems, browsers, voice access, and more.
The Japan Fair Trade Commission (JFTC), February 2023
Examining the current landscape of established app stores reveals Google Play dominating with a staggering 97.4% download share among Android users. In contrast, Amazon’s “App Store” claims 1.2%, Samsung’s “Galaxy Store” secures 0.4%, and Huawei’s “HUAWEI AppGallery” captures 0.8%.
Despite Samsung’s efforts to differentiate itself with the Galaxy Store, its 0.4% market share reflects the challenge of competing in a predominantly iOS and Google Play-centric market.
User Behavior and App Store Loyalty
The report sheds light on a significant revelation: despite the existence of multiple app distribution stores, the majority of users rely solely on the app distribution store provided by the operating system.
While giants like Amazon, Samsung, and Huawei invest in their app distribution stores, the data indicates that user behavior remains largely unchanged. Users seem uninterested in exploring alternatives, and competition in this space appears minimal.
The Dilemma: User Safety vs. Market Entry
The Digital Market Competition Headquarters’ data suggests that users are not actively seeking new app distribution stores. Even with ample capital support for Amazon and the strategic focus of Samsung and Huawei, the challenge of capturing market share remains.
As the competition report becomes public, soliciting public comments, stakeholders and enthusiasts in the smartphone industry are encouraged to delve into the findings and contribute to the discourse. It seems that, despite concerns echoing those in Europe, Japan is grappling with the dilemma of creating laws that may not find practical application without a clear destination for change.
The Future of Mobile Ecosystem Competition
As the report undergoes public scrutiny, it opens the door to a broader conversation on the future of mobile ecosystem competition. Stakeholders, industry experts, and users alike must actively participate in shaping policies that not only encourage healthy competition but also address the concerns raised by informed consumers.
Japan’s journey toward introducing competition to app distribution stores serves as a unique case study with potential implications for the global digital market. Striking the right chords between regulatory frameworks, market dynamics, and user sentiments will be instrumental in defining the future landscape of mobile ecosystem competition.
In the coming months, the unfolding debate and subsequent regulatory decisions will undoubtedly shape the trajectory of the digital market, impacting not only Japan but also influencing global perspectives on innovation, competition, and user safety within the mobile ecosystem.
