By Cecilia Kang
Washington Post Staff Writer
Tuesday, August 4, 2009
Apple said Monday that Google chief executive Eric Schmidt was resigning from its board to avoid potential conflicts as the two companies become greater rivals.
The move comes as the Silicon Valley giants face increased scrutiny by federal regulators who have pushed aggressively in recent months for more competition in the high-tech and telecommunications industries. Regulators are investigating the board ties between Google and Apple, hiring practices by competing tech companies and a settlement Google struck with authors and book publishers over the rights to digital books.
Apple chief executive Steve Jobs said the company and Schmidt mutually agreed that the Google executive should step down now that competition is heating up between the companies over Internet browser, handheld and computer software.
Jobs said in a news release that Schmidt's effectiveness on the board, which he has served on for three years, "will be significantly diminished since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest."
The Federal Trade Commission said that while it commends Google and Apple for "recognizing that sharing directors raises competitive issues," it is still investigating remaining board ties between the companies. The former chief executive of biotech firm Genentech, Arthur Levinson, also sits on both boards.
Apple has been a rare star in the economic downturn, buoyed by sales of the iconic iPod and iPhone. But its success has come as it has tightly controlled which applications can be loaded on its iPhone and which companies can sell the handset. Apple has an exclusive pact with AT&T.
Members of Congress and the Federal Communications Commission have questioned whether such practices edge out competitors and leave consumers with fewer choices in mobile technology. For instance, the FCC sent letters to Apple and AT&T Friday demanding to know why the firms removed Google's voice application, which competes with AT&T's service, from the iPhone.
"Apple is a very impressive and very innovative company, and it has some unique ways of doing things that may be partly responsible for its success but may have also laid the foundation for its problems," said Ed Black, president of the Computer and Communications Industry Association, a high-tech industry trade group.
At the heart of concerns over Apple's practices is a debate over so-called "open" and "closed" approaches to technology development by high-tech firms, as network operators such as AT&T, Verizon and Comcast have fought against new regulations that would diminish their control over their communications networks, legal scholars and analysts said.
President Obama has supported the idea of network neutrality, saying during the election campaign that Internet users "must be free to access content, to use applications and to attach personal devices." FCC Chairman Julius Genachowski said in a recent interview that he will push for more competition by promoting the role of startups and "edge" companies that are creating new applications.
"Apple believes it has a better product with a more closed system," said Tim Wu, a Columbia Law School professor and chairman of public interest group Free Press. "But what may be good for Apple may not be good for innovation, and that is the battle that is going on here, the battle over what the future of the mobile platform will look like."
It's an unfamiliar position for Apple, the Cupertino, Calif.-based firm that has long been known as an underdog of sorts to high-tech giants such as Microsoft. And Apple may not be alone. Among the many issues under review, the FCC is looking at other exclusive contracts between cellphone makers and wireless service operators -- such as the partnership between Palm and Sprint Nextel -- to see if they push out smaller competitors.