Is the iPad’s Exclusion of Flash Unlawful?

Last month, Steve Jobs introduced the iPad to an eager crowd of Apple faithful, promising it would be magical and revolutionary.   Minutes into the presentation, Jobs browsed to a New York Times article only to find that in place of a large central image was a blank space with a small blue cube.   Some audience members seemed to laugh out loud at this all-too-familiar sight, realizing that the iPad, like the iPhone, lacked Flash capabilities.

Flash, owned and distributed by Adobe, is an extremely popular method to add animation and interactivity to web pages, used by over 85% of top websites.  Anyone who has visited YouTube, Hulu, or the vast majority of media rich websites has enjoyed the benefits of Flash.  Not surprisingly, many iPhone users are already demanding Flash.  Adobe reported that in December 2009 there were seven million attempts to download Flash from iPhones and iPod Touches.

With such a high level of demand, why would Apple refuse to adopt Flash on the iPad, a device well equipped to handle the technical requirements of Flash?  Well known entrepreneur Mark Cuban claims “[t]he reason is obvious. No flash, far less streaming over 3G… Less bandwidth consumed means AT&T can offer a great price on the 3G data service.”  A recent article in the Wall Street Journal offered a different explanation: “Flash would let users freely obtain the kinds of features they can only get now at the Apple App Store.”  In other words, Flash would allow users to watch videos and play games in a world outside of Apple’s control and revenue stream.

As word spread that the iPad would lack Flash, bloggers began to question Apple’s claim that the device would be the “best way to experience the internet.”  Some predict that the iPad’s closely controlled software environment could have a chilling effect on innovation.  Unlike traditional operating systems, the iPad and iPhone operating system forces all software downloads through the App Store, giving Apple significant control over how the devices are used.  Reflecting these concerns, Adobe reacted to Apple’s decision by stating that “[w]e strongly believe the Web should remain an open environment with consistent access to content and applications regardless of your viewing device.”

Normally, one would expect Apple to support Flash due to simple market forces, the argument being that without Flash, fewer people would buy the iPad, thus harming Apple’s profits.  Here, however, Apple is likely more profitable by excluding Flash in order to promote the App Store.  The absurdity of this situation begs the question of whether Apple’s decision is lawful and what might be done to intervene.

Net Neutrality Concerns

Traditionally, net neutrality has been discussed in the context of broadband providers attempting to restrict information exchanged by its networks.  An example would be a cable internet company curbing P2P traffic to save on bandwidth expenses.  Proponents of net neutrality rules argue that legislation or regulation is necessary to stop such limitations.  These rules are generally opposed by telecom providers but supported by consumers and web companies offering high bandwidth music, movies, and games.

Without delving into the merits of the debate, it is sufficient to state that the Obama administration supports net neutrality, prompting the FCC to propose new rules which would expand the scope of net neutrality for both wired and wireless providers.  While still in the rulemaking process, these rules could be codified by the FCC within the next few weeks.

Perhaps the most important new rule would require broadband providers to “treat lawful content, applications, and services in a nondiscriminatory manner.”  This broad provision provides exceptions in order to manage network congestion and prohibit unlawful content.  Under the plain meaning of this rule, Apple’s decision to exclude Flash content in favor of its officially sanctioned apps might very well be prohibited.

Apple may contend that the lack of Flash is a legitimate effort to manage AT&T’s network congestion.   This argument seems weak, however, because Flash requires no more bandwidth than many popular apps, such as the YouTube app and many newly approved voice over 3G apps.  It seems likely that the lack of Flash is really just a way to promote the App Store, making it difficult for Apple to fit this decision within the network management exception.  Even if it were trying to limit network congestion, network neutrality would demand a nondiscriminatory approach, such as offering tiered data plans or prohibiting all high bandwidth functions from the 3G network.

While the FCC has clear authority over wireless networks, it’s not entirely clear that it could mandate software requirements for mobile browsers.  Apple might argue that since it is not a broadband provider, these net neutrality rules should not apply to it.

Still, the FCC seems more than willing to get involved in this arena.  Last fall the FCC inquired into the rejection of the Google Voice app, which caused quite a bit of bad press for Apple.  The inquiry included broad questions about Apple’s method of approving apps.  Given the FCC’s general interest in the app approval process, it is not farfetched for the FCC to inquire about how Apple decides to reject standards in its web browser.

Officially, the FCC’s inquiry into the Google Voice rejection was part of ongoing proceedings into wireless open access and handset exclusivity.  However, it didn’t take a formal FCC ruling for Apple and AT&T to change course and allow voice over 3G apps.  A similar FCC inquiry in this instance might call enough attention to the matter that Apple would relent and decide to allow Flash without the need for formal proceedings.

It will be interesting to see if the FCC decides to get involved in this situation.  Given its recent focus on net neutrality and its willingness to question Apple’s activities, some sort of action in this instance would not be surprising.  Involvement would show that the FCC is serious about making the net a truly open place, even on wireless networks.

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