May 16, 2022

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Big Tech’s Next Monopoly Game: Building the Car of the Future

Indeed, the smartphone wars are over, and Google and Apple won. Now they — and...

Indeed, the smartphone wars are over, and Google and Apple won. Now they — and Amazon — are battling to control how you operate within your car. All three see autos as the next great opportunity to reach American consumers, who spend more time in the driver’s seat than anywhere outside their home or workplace. And automakers, after years of floundering to incorporate cutting-edge technologies into cars on their own, are increasingly eager for Silicon Valley’s help — hoping to adopt both its tech and its lucrative business models where consumers pay monthly for ongoing services instead of shelling out for a product just once.

Now, having missed the boat as the tech giants cornered the market on smartphones, some policymakers and regulators believe the battle over connected cars represents a chance to block potential monopolies before they form.

State attorneys general who sued Google in 2020 for monopolizing online search highlighted concerns about the company’s move into autonomous cars in their federal antitrust complaint. Meanwhile, in Europe, the EU’s competition authority has opened a probe into Google’s contracts related to connected cars.

“It’s really hard to remedy anticompetitive conduct five or 10 years down the line,” said Charlotte Slaiman, competition policy director for Public Knowledge. “For many consumers, buying a car is a long-term decision. If a consumer is going to be locked into services with a certain company because they bought a car that they are going to use for five to 10 years, that can make competition more difficult.”

The stakes are enormous. Tech companies and the automakers envision a future where riders can seamlessly blend work, play and chores, easily ordering groceries, scheduling work meetings or watching TV from the comfort of their cars. The data coming off those vehicles also could automatically update maps, notify city workers about potholes and tell brick-and-mortar retailers where customers travel from.

“The ride is no longer the point,” said Jim Heffner, a vice president at Cox Automotive Mobility who specializes in autonomous and connected vehicles. “Data is the cornerstone. … Apple and Google and others want to be at the epicenter of that.”

A search for the cutting edge

Automakers design cars three to five years before the vehicles ever hit the road, lagging well behind the pace of tech innovation. The technology in a new car today is already years out of date when it arrives at the dealer’s lot, said James Hodgson, an autonomous vehicles analyst with ABI Research, while the pace of connectivity — and consumers’ desires for favorite devices — moves much faster.

That dynamic led car manufacturers to outsource the dashboard’s entertainment functions to smartphones, he said, enabling customers to use their favored phone technology while driving. Nearly all of today’s cars today support Apple’s CarPlay or Google’s Android Auto, which connect a smartphone to the vehicle’s system. Apple first announced CarPlay in 2014, with Google following suit with Android Auto the next year. A driver can make phone calls, listen to music or stream Netflix, but all of the work happens on the phone and is mirrored onto the car’s speakers and screens.

Now, the tech companies are looking to eliminate any choice of technology, building the software for the car itself.

Back in 2015, Google and Ford first began discussing a partnership to pair Google’s software and self-driving car unit Waymo with Ford’s auto manufacturing expertise. But the deal fell apart over Ford’s insistence that the technology be exclusive to its products; Google wanted to be able to sell its self-driving technology to other automakers. The deal’s failure led to the ouster of Ford’s then-CEO Mark Fields amid concerns about the Michigan carmaker’s lack of progress in the self-driving space.

Meanwhile, Google continued to expand its Android offerings for cars. Volvo, Stellantis — the parent company of Chrysler, RAM, Jeep and Plymouth — and General Motors all struck deals with Google.

Like on the smartphone, manufacturers can simply use the Android operating system as the basic software for their entertainment unit. But if they want some of Google’s more popular products — like Google Maps or Google’s voice assistant — they must sign a contract with the search giant.

The company offers automakers a package known as Google Automotive Services, or GAS, as an all-or-nothing deal. In order to get access to Google Maps, for example, a carmaker must also agree to use Google’s Play Store and voice assistant.

Honda, Volvo and the Renault-Nissan-Mitsubishi Alliance have all agreed to the package, while Chrysler, Jeep and Plymouth only use the Android operating system but selected Amazon’s Alexa as the primary voice assistant and TomTom for navigation.

General Motors, too, split the difference. Beginning with the 2022 models, its cars will use Google. In earlier models, the company has offered its own navigation system called Maps+ based on Mapbox, one of the few remaining mapping competitors to Google.

And, finally, Ford — under its new CEO, Farley — tried to do them all one better, inking a deal to have the carmaker’s engineers work directly with Google software designers to embed technology into the vehicle while also creating a self-driving car. They dubbed the collaboration “Team Upshift.”

“One of the most important parts of our strategy is to partner,” Farley said on CNBC. “That means that we have to get out of the business of doing generic things that we do not add value, like navigation systems and a lot of the in-car entertainment experience.”

Under the deal, Google would provide all that and more.

Setting standards

Google’s involvement in the auto ecosystem is becoming so widespread that a leading industry standards group, the Connected Vehicles Systems Alliance, announced in October that it is working on creating international benchmarks for cars’ software integration with Android.

Separately, Waymo — which became a separate entity under Google’s parent company Alphabet in 2016 — began offering self-driving taxi services in Chandler, Arizona, a suburb of Phoenix. This summer, the company expanded service to San Francisco. Waymo’s handpicked riders, who request service through an app, can travel most of the city, though not the downtown area.

The self-driving company also has partnerships with Volvo, Stellantis’ Chrysler, Jaguar Land Rover and the Renault-Nissan-Mitsubishi Alliance to incorporate its technology into their cars, though none have yet come to market.

Apple, meanwhile, is waiting in the wings, primarily through its own self-driving car project, “Project Titan,” which has been in the works since 2014. Over that time, the project has vacillated between building out just the self-driving software and a fully autonomous vehicle. It also has stalled several times, most recently after the project’s leader — Doug Field, an engineer who helped develop Tesla’s Model 3 — decamped for Ford in September.

Little is known about the notoriously secretive company’s car project, even though CEO Tim Cook acknowledged in 2017 that Apple was working on autonomous technology for cars. The company didn’t respond to a request for comment on this story.

“There is a major disruption looming there,” Cook told Bloomberg of the auto industry. “We sort of see it as the mother of all AI projects.”

The company has filed for dozens of patents related to cars, including for displays that would project information on the windshield and airbags and safety systems for rear-facing seats. Using those patents, U.K. car leasing company Vanarama built a model of the Apple car as a sleek SUV-like model with seats that swivel so they face one another.

Over the years, Apple has reportedly talked with Hyundai, Nissan and Toyota as partners to help manufacture its cars. In early 2020, Apple also held acquisition talks with electric vehicle startup Canoo, whose zero-emission vans are set to debut next year. Those talks ultimately failed and Canoo opted to go public last year.

“Apple has always been less willing to entrust their brand to someone else,” ABI’s Hodgson said. “They want to own the experience end-to-end.”

Enter Amazon

E-commerce giant Amazon is also highly interested in connected vehicles, both as an opportunity to reach consumers and for its own delivery needs. In 2014, the company tried to enter the smartphone market with the Fire phone, a failed effort to challenge Google and Apple. While Fire was a commercial disaster, one part of the project survived and has become key to Amazon’s car ambitions: Alexa.

The earliest incarnations of Alexa Auto, Amazon’s version of the popular voice assistant for cars, were simply a smartphone app connected to the car through Apple Car Play or Google’s Android Auto. But accessing the car’s systems through Apple or Google meant limiting the functionality Alexa could provide, so Amazon changed tacks and started working directly with automakers to build their service into the car.

BMW and GM vehicles debuted with Alexa in 2018, and more car makers including Audi, Jeep and Land Rover have added the voice assistant since. With Alexa built in, drivers can remotely lock or unlock the car doors, turn on the engine or check the fuel from smart speakers in their home. Likewise, Alexa in the car can check the thermostat and turn on or off lights at home, while also providing information on weather or helping buy products on Amazon or at its Whole Foods subsidiary.

For cars without Alexa built-in, Amazon now offers a version of its popular Echo speaker for the car — a pocket-sized device designed to attach to dashboard air vents.

Alexa works alongside voice assistants created by carmakers such as Ford, BMW, General Motors and Audi, said Frankie Tobin, an Amazon spokesperson.

“We believe voice agents should be interoperable on a single device (or in a vehicle), and that voice-enabled products should be designed to support multiple, simultaneous wake words, so customers can easily interact with the voice service of their choice,” Tobin said.

Voice controls are particularly attractive to carmakers, ABI’s Hodgson said, because they help keep drivers from taking their hands off the wheel or eyes off the road. And Alexa’s widespread usage within the home already means it has a ready base of customers who would value integration, he said.

Amazon hasn’t been as successful as Google with its partnerships with traditional automakers, because it’s taking a “hybrid” approach, Heffner of Cox Automotive said, and focusing on new entrants to the auto space. Last summer, Amazon acquired Zoox, a California-based company building autonomous taxis. The boxy four-passenger vehicles have no driver and passengers sit facing each other. The vehicles are intended for driving in urban spaces, and the company hopes to debut its service soon in San Francisco and Las Vegas, though it hasn’t yet announced a commercial launch date.

The e-commerce giant has also invested in Rivian, an electric vehicle manufacturer. In September 2019, Amazon then-CEO Jeff Bezos announced the company had ordered 100,000 electric delivery vans from Rivian, at the time a relatively unknown company developing electric SUVs.

Amazon has a 20 percent stake in Rivian, which went public last month raising nearly $12 billion, making it one of the world’s most valuable automakers, ahead of both Ford and GM. Ford and Cox Automotive are also investors in Rivian.

“Amazon has been an amazing partner,” Rivian CEO R.J. Scaringe told Bloomberg in an interview before the IPO. Scaringe touted “the collaborative relationship” with Amazon, whose “ecosystem of services” will be built into the vans.

The relationship is heavily in Amazon’s favor: the e-commerce giant has exclusive rights to Rivian’s vans for the next four years, though it isn’t obligated to buy any of them at all and Amazon maintains the rights to buy from other automakers.

Amazon declined to comment on the Zoox acquisition or the Rivian investment, pointing to a February blog post on the retail giant’s plans to reach net-zero carbon emissions by 2040.

Amazon aims to have the largest fleet of delivery vehicles in the world, Heffner said, but it wouldn’t be far-fetched for them to use some of the technology developed on the commercial vehicle side to aid its consumer business.

Heffner suggested Amazon might be willing to move to a model where it explicitly offers rides in exchange for transactions and data.

“We’re talking about the largest marketplace in the world,” he said. Today “they are connecting the consumer with suppliers and the marketplace. In the future, when transportation is just a mode of moving from point A to point B,” Amazon will want its marketplace to be available for consumers there as well.

Brand loyalty or monopoly?

While Silicon Valley and automakers are thrilled about the future of connected and autonomous cars, regulators and privacy advocates are less so.

“These companies have an amount of data on us that they shouldn’t have, and they have a history of not using it in responsible ways,” said Katharine Trendacosta of the digital civil liberties group Electronic Frontier Foundation. “They have a history of going back on promises they have made about that data.”

She cited Google’s pledge during the DoubleClick acquisition in 2008 — which it later reneged on — not to combine data from its consumer products with that from its advertising services.

Eric Gundersen, Mapbox’s former CEO, complained to Congress this spring about how Google’s restrictive contracts are impacting his company’s ability to offer alternatives. And those exclusive deals will continue to give Google a leg up over time, he said.

“It’s the data piece that is so critical here,” he told a House panel in February. “It’s not just about the user app data: the map and the operating system all the way down to the data coming off the vehicle back to the cloud. This is how AI learns … it’s all about the data.”

Ford assured reporters when it announced the Google deal that car owners will be able to install Siri or Alexa, but those Apple and Amazon products will have to work in an environment built by and optimized for Google. And only Google and Ford will have access to the user data generated by the system, which will be stored in Google Cloud.

“It’s not truly an open system,” said an executive at an automotive supplier that competes with Google, who asked for anonymity to candidly discuss the search giant without fear of retaliation. Google is “corralling everything through their system and controls what information is released downstream.”

Google said any data-sharing with other companies is limited by its privacy policies and the terms of its contracts with automakers.

The search giant’s strategy of making Android free to all but using restrictive contracts for its more popular products isn’t new. Europe’s top competition authority fined the search giant 4.34 billion Euros — roughly $5 billion — in 2018 for using a similar playbook related to Android smartphones. (Google is appealing that decision.)

A coalition of 38 states and territories also sued Google last year over the tech giant’s contracts for Android in smartphones, and officials noted the suit’s high stakes as the company makes its move into cars.

“When smartphones took off, Google made sure they controlled search on Apple’s iPhone. They are doing the same thing on voice and connected cars. It’s a similar playbook,” Tennessee Attorney General Herbert Slatery III told reporters when the case was filed in December 2020.

Google said the EU decision only applies to Android phones, not software used on other platforms like cars. The connected car market is “a fiercely competitive and growing market,” the company said in a statement. “Ultimately, manufacturers can choose which voice assistants to install on their cars and users can also choose which assistants to use and install.”

Google’s automotive partnerships offer innovation and new benefits to consumers, Google spokesperson Peter Schottenfels said.

“There is enormous competition in the connected car space, and we compete with an array of companies offering car infotainment systems like Apple CarPlay, Amazon Alexa, Nuance Automotive, and others,” Schottenfels said. “Android Automotive Operating System is an open platform that is customizable, and both manufacturers and users have the choice to download and install a wide variety of third party apps.”

Though the states highlighted concerns about Google’s impact on emerging technologies, their lawsuit won’t go to trial until September 2023. Appeals are likely, meaning their case is unlikely to be resolved until 2025 or later. That lengthy timeline means a suit might not be able to stop Google or any of the tech companies from gaining a dominant foothold in the auto industry, monopoly experts warned.

“One of the problems we see with Big Tech platforms today is they are able to retain power even though technology changes,” said Slaiman, who investigated monopolization cases at the Federal Trade Commission before joining Public Knowledge. “The transition to a new technology is a time when a new innovative competitor has a shot.”

While the Apple Car looks like an exciting new technology, a less charitable view of Apple’s strategy is the company wants to further enmesh consumers into their profitable ecosystem, where the company gets a 30 percent cut of all digital sales, said Trendacosta, associate director of policy and activism at EFF, which counts Google search rival DuckDuckGo among its donors.

For decades, Apple has espoused some of the most restrictive repair policies for its computers, phones and tablets. Only in November after a push by the White House and federal regulators did the iPhone maker announce that it would begin allowing consumers to repair their own devices.

“Apple’s whole goal is to lock you into their ecosystem,” she said. “I don’t love the idea of them doing that in car form as well.”

Smartphone 2.0?

Both Apple and Google have come under fire around the world for the tight control they wield over their smartphone marketplaces, which require other companies to fork over up to 30 percent of subscriptions and sales made on their platforms.

Other major tech companies including Spotify, Tinder parent company Match and Epic Games have railed against the policies, urging policymakers in the U.S., Europe and Asia to break Apple and Google’s dominance. In August, South Korea became the first country to prohibit the duopoly from forcing companies to use their payment systems.

Google said automakers that have signed contracts to offer its Maps, assistant and Play Store can choose to offer an alternative app store, though some have chosen to offer only Google’s app store.

This summer, a bipartisan group of U.S. senators also introduced legislation that would force Apple and Google to open up their smartphones by allowing other app stores or cheaper payment methods. But the legislation is specifically targeted at smartphones, experts said, and likely wouldn’t affect the connected cars.

The tech giants “already profit enough off of where we go and what we search for. Getting a foothold in the auto industry could turn all our movements into profitable data points,” said Sarah Roth-Gaudette, executive director of Fight for the Future, a progressive advocacy group focused on digital rights.

The United States’ lack of a national privacy law and relatively lax anti-monopoly enforcement mean there’s little preventing Google, Apple and Amazon from dominating this new market, Roth-Gaudette said.

It’s important “we get these important guardrails in place so it doesn’t go the worst possible way,” she said.

Both Roth-Gaudette and EFF’s Trendacosta highlighted legislation pending in both the House and Senate that would prevent the tech companies from scooping up promising rivals and giving preference to their own products in emerging areas like cars.

“I know it’s hard to see in the future and difficult to make guesses about what companies should be allowed to do with technology that doesn’t exist. But we know what they are doing with things that already exist,” Trendacosta said. “If we had rules that carry forward to whatever they make in the future, we’d be in a better place.”

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