By Jon Fortt
August 5, 2009

By keeping tight-fisted control over its products, Apple has produced stellar results – but now it may be going too far.

Apple’s control issues have been a key ingredient in its success. CEO Steve Jobs is fond of pointing out that Apple’s hands-on approach to crafting both hardware and software has led to such breakthrough products as the Mac, the iPod and the iPhone – and it’s fair to say the attention to detail hasn’t hurt Apple’s marketing, either.

Lately, though, Apple’s (AAPL) domineering ways have drawn even more attention than usual. Last year Apple purchased a chip design firm to make its own silicon, an unprecedented move in the modern computer industry. This summer it blocked Palm (PALM) from linking its Pre smartphone into iTunes. And recently it stopped Google (GOOG) from releasing two programs for the iPhone: Google Latitude, which shows you where your friends are on a map; and Google Voice, which uses the Internet to bring more features to phone calls.

The first two moves aren’t surprising, coming from Apple. The company designs so much specialized technology that a custom chip makes sense, and it has been blocking rivals from iTunes for years.

But blocking Google from the iPhone App Store? That’s different. When it rejected the web giant’s iPhone apps, Apple seems to have taken its desire for control to a whole new level – one that could be unhealthy in the long run.

Apple’s official line on its rejection of Google Voice sounds reasonable. The company said it’s too similar to the Phone program that comes with the iPhone. (It issued a similar explanation when it rejected a mobile version of the Opera browser.) It sounds reasonable, that is, until you start applying it to some other important computer platforms. What if Apple were to block the Firefox browser from the Mac because its Safari browser already comes pre-loaded? What if Microsoft (MSFT) were to block iTunes from Windows because its own Media Player does basically the same thing? Someone might be getting a call from the Justice Department.

Putting a sock in Google Voice

Spend some time with Google Voice, and it’s not hard to see why Apple might not be thrilled with having it on the iPhone. The service comes with a free phone number that lives on the Internet and bundles a treasure trove of features like visual voicemail, text messaging, call forwarding, call screening, cheap international calling and transcription. (That’s right, the program uses speech-to-text technology to type out your voicemail messages and e-mail or text-message them to you. Very cool.) Basically, Google Voice does everything the iPhone’s built-in software does, and a lot more.

I’ve been using Google Voice (previously called GrandCentral) for a few years. I didn’t find much use for it at first – it was yet another phone number to give out and keep track of – but I gradually became a fan. I could give my Google Voice number to work contacts and make it ring both my cell phone and home phone when I was out of the office. It screened my calls beautifully. And the visual voicemail allowed me to quickly plow through messages from anywhere.

When I got an iPhone in early May, Google Voice got even better. An enterprising third-party developer had written an app, GV Mobile, that tapped into Google Voice and allowed me to access voicemail without having to use a browser. I started using the service even more.

So I can see how this could be unsettling for Apple. A Google Voice app could eventually replace Apple’s software as the main interface for operating the iPhone – and that’s a scenario the folks in Cupertino probably don’t fancy so much. In its no-thanks letter to Google, Apple said it rejected Google Voice because it “duplicate[s] features that come with the iPhone.” At the same time, Apple kicked out two other independent apps that had been available on the App Store for four months: VoiceCentral, and my beloved GV Mobile. (Fortunately it still works on my phone, even after I upgraded to the 3GS.) An Apple spokesman did not respond to a request for comment. (Google Latitude and Google Voice are still available through the web browser.)

Meanwhile, the Google Voice incident has struck a nerve. Neither Apple nor AT&T has said much, but many bloggers quickly pointed a finger at AT&T, figuring it pressured Apple to squash Google Voice to maintain a lock on its cellular network. The critics probably piled on AT&T too fast, though – a source close to the carrier says Apple slapped down Google Voice on its own, and points out that there’s already a Google Voice app for BlackBerry (RIMM) that AT&T has no problem with.

Why the FCC cares

Even the government is paying attention to the issue. The Federal Communications Commission on Friday sent a list of questions to Apple, Google and AT&T to sort out what really happened to the Google Voice app. And make no mistake: The questions are coming from the top. When I grabbed a minute of his time during his quick visit to Silicon Valley on Monday to ask why the FCC cares about a Google Voice app, FCC Chairman Julius Genachowski – an iPhone user – was ready with a quick, if boilerplate, answer:

“The FCC is the country’s expert agency around communications, and it needs to be proactive in understanding the marketplace, understanding competition issues, understanding consumer issues,” Genachowski told me. “What the bureau did last week was ask a series of questions to make sure that it understands what’s going on in the communications marketplace.”

But apps, I asked? Since when has the FCC cared about apps?

“Communications technology is changing all the time, and the FCC has to be able to stay current, understand what’s going on in the marketplace, and make sure that competition is promoted and the interests of consumers are protected.”

Whoever is to blame for Google Voice’s absence from the App Store, Apple’s heavy-handed tactics could hurt the iPhone in the long run. Part of the reason for the device’s meteoric rise is its image as an open platform where smart companies and ambitious startups can build great products and, through the App Store, get them noticed. Already, some developers had been grumbling about Apple’s slow-moving app approval process, and the seemingly arbitrary reasons it sometimes gives for rejecting programs. Now that anger is likely to snowball – and open up opportunities for Apple’s rivals.

Apple’s MySpace moment

We’ve seen it happen before, to MySpace. Two years ago it was the undisputed ruler of the social networking world, with about 90 million monthly users and a horde of ambitious developers looking for ways to make money on the site. Then came a dustup when MySpace began rejecting video viewer widgets that third-party developers such as Photobucket, Imeem, Vidilife, Stickam and Revver had built for its pages. MySpace said it made the move for security reasons, but the startup community suspected it really just coveted a cut of the advertising that developers were pulling in. Either way, the message was clear: MySpace’s platform wasn’t open.

I wrote at the time that MySpace’s controlling ways were ill-advised, and the words could just as easily apply to Apple’s App Store today. An excerpt:

If MySpace keeps this up, it could be the beginning of the site’s slow decline. It certainly won’t happen quickly; the site has about 90 million visitors each month. But the site’s young denizens are a notoriously fickle bunch. Don’t forget how quickly they abandoned Friendster, the social networking pioneer, when the site became slow and stagnant. When that site began to act as if it didn’t need to fulfill its promise to deliver users a fluid, fun online social experience, they ditched it for the next hot thing.

By blocking so many widgets, MySpace is exhibiting Friendster-like hubris. Users embraced MySpace because it offered an open canvas on the Web – like a modern version of the collages high school girls painstakingly create inside their locker doors. Unlike other services (particularly Facebook) where members understand that they are participating in a more structured social space, MySpace users value the site for its whimsy.

Unless MySpace turns this around, it will provide ample opportunity for Microsoft, Yahoo (YHOO), Google, or some ambitious startup to build a truly open area for expression – and MySpace may end up joining Friendster as a cautionary tale of what happens when pride and a haughty spirit cloud a company’s view of what customers want.

That, of course, is exactly what happened. Facebook opened itself up as a more open platform. Developers flocked to it, and users followed. MySpace is now a turnaround project, an example of what not to do.

Today, it’s almost inconceivable that such a thing could happen to Apple – its iPhone is setting the pace for smartphones, and its latest financial results defy gravity. But there are plenty of rivals waiting in the wings. The best-positioned? Google, with its Android OS. Google touts Android as a free and open platform, and dozens of Android-based phones are scheduled to hit the market in the next year.

So far there’s no Android handset as sleek as the iPhone, and there are far fewer programs available in its download store. But if you want Google Voice on your phone? Well, on Android, there’s an app for that.

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