Is Google Strong-Arming Phone Manufacturers to Access Consumer Location Info?

05/04/2011 01:09 pm ET | Updated Jul 04, 2011

How much did Google want data on where smartphone users went with their device?  Apparently enough to pick major fights with manufacturers of their Android phones and, allegedly, commit major antitrust violations to force those phone manufacturers to use Google location-based services.

We are likely about to learn a lot more about how important spying on smartphone user location information is to Google, with a Massachusetts judge granting a location info competitor, Skyhook, a chance to conduct discovery in its lawsuit against Google in charges the company strong-armed smartphone manufacturers not to use Skyhook's technology.  (See the judge's decision from yesterday here).

Skyhook actually pioneered the practice of driving cars down streets to identify wi-fi hotspots in homes and businesses to provide location information for phones (although it didn't collect personal data the way Google did with its wi-spy vehicles).  It has mapped the locations of more than 250 million Internet routers which allows it to help users identify exactly where their phone and they are.  Skyhook's location-based system is used by a range of competitors to Google's location-based products, including by Mapquest and it was used by Apple before it began developing its own location-based databases using its Iphone (thus the most recent publicity blowup over Apple tracking customer locations.)

Did Google Use Its "Contractual Power" to Undermine Competition? Skyhook has a separate lawsuit charging patent infringement against Google for copying its approach to providing location services, but the current lawsuit is even more relevant to the debate over whether Google is guilty of antitrust violations.  In this case, Skyhook charges that Google told Motorola and other manufacturers that if they wanted to make Android phones, they had to install Google's location services as well, so that Google would have access to consumer location information.    As the judge noted, this is clearly a valid legal theory of illegal action by Google if  "Google used its contractual power not to protect its legitimate business interests, but to injure Skyhook and thereby avoid competition."

Unlike some of the less charted territory of antitrust and search engine dynamics, the charge by Skyhook is pretty traditional: that Google used its dominance and control of the Android operating system to shut out a competitor in a different market, in this case location-based services.   Such a charge of illegal "tying" was exactly what brought scrutiny to Microsoft a decade ago when it told manufacturers they had to install the Explorer web browser as a condition of being allowed to install Windows.

The judge's decision in the Skyhook case is preliminary and just gives Skyhook the right to request more documents from Google to prove its case, but given Google's general stonewalling on providing information about the whole wi-spy fiasco and how tracking users' locations fits into the company's strategies, the information coming out of discovery could open a wide window into Google's practices.

Not a "competitive market": The case already pushed into the public record at least one set of internal Google emails that the San Jose Mercury News publicized early this week where top Google executives emphasized "how important Google's wifi location database is to our Android and mobile product strategy."

But even more relevant to antitrust concerns about Google are paragraphs in the emails (PDF), which contains some rather stark comments about competition, or lack thereof, in online location-based services.

In the emails, Google location service product manager Steve Lee writes in early 2010:

"Our wifi location database is extremely valuable to Google because it is not a competitive market ...Skyhook is the only other viable alternative and there would  be incredible risk to depend on them" [emphasis added]

The emails make clear that Google was unhappy that Motorola had decided to use Skyhook for its location services within an Android phone and Steve Lee writes that they need to avoid this with other companies, including "revising our GMS contracts to avoid any confusion of this with partners in the future."

And the Skyhook lawsuit charges Google did soon revise its contracts with companies making Android phones to make direct use of Skyhook location services a violation of the manufacturers contracts with Google, which forced Motorola to drop use of Skyhook in favor of using Google for its location-based services -- and giving Google access to those phones' user location information to keep building the value of Google's wifi database.

How a Free Operating System Gives Google Power: Here you have a market that even Google admits is not competitive and the company is seeking to strangle one of the only viable competitors through leveraging its Android contracts to knock them out of the game.  Thus, you have the payoff to Google of providing its "free" Android operating system to manufacturers: it gets to control the data that delivers the consumer information for Google's advertisers, where the company's money is really made.

If proven by Skyhook in its lawsuit, this becomes one of the clearest examples of the need for antitrust regulation of the search giant.