The Federal Communications Commission is investigating Apple and
AT&T after Google’s Voice iPhone app was rejected for inclusion in
the App Store.

The justification: the FCC “has a mission to foster a competitive
wireless marketplace, protect and empower consumers, and promote
innovation and investment
“.

Already, AT&T is denying that it is involved with the App Store, essentially placing the blame squarely on Apple.

While time will reveal what exactly transpired, the move to banish Google Voice and related third-party apps has sparked anger amongst iPhone users. And it’s no surprise why: Google Voice and the related apps would provide iPhone users with free SMS and cheap international calls. They also included features that overlap with existing iPhone functionality.

But should government regulators be involved in deciding what apps get into the App Store? I don’t think so.  Government intervention in an area like this is not only impractical, but could actually hurt competition.

Here’s why.

First, if a government regulator steps in to help Google, how will it decide who else to advocate for? Apple is notoriously picky when it comes to App Store inclusion. Is the FCC going to lend a helping hand to every developer whose application hasn’t been approved promptly? Will it assist developers whose applications were rejected on arbitrary or morally-subjective grounds?

Second, as angry as consumers and developers might be, nobody is forced to do business with Apple. If Apple want to make bone-headed business decisions, it should be allowed to. Obviously that it would make such decisions is disappointing because the iPhone is one of the most desirable smart phones on the market today. But Apple’s loss creates opportunity for its competitors.

After all, if Apple creates an ecosystem that’s far too restrictive and denies consumers the choice and flexibility they demand, somebody else will have the opportunity to meet that consumer demand. There’s no shortage of other great smart phones and with handset makers and carriers both looking to achieve the type of success Apple and AT&T have achieved with the iPhone, somebody will learn from Apple’s mistakes. If government steps in and keeps companies like Apple from making poor decisions, it will actually harm Apple’s competitors because it will take away their opportunity to respond with a more attractive offering.

The reality is that the government isn’t needed here. If booting Google Voice and related third-party apps is the outrage we’re told it is, there will be consequences. Already, we can see the free market working. Steven Frank, co-founder of Panic, a prominent OS X development shop, is abandoning his iPhone for a Palm Pre as a consumer. And as a developer, he’s never developed for the iPhone “because the app store process is so stacked against us“. Michael Arrington of TechCrunch is also ditching his iPhone.

While these are just two individuals, if Apple alienates enough consumers and developers, there will be more Steven Franks and Michael Arringtons and Apple will find that it has managed to perform reverse alchemy — turning gold into lead. That’s the way the free market works and government regulators should let it work that way. There are far too many great companies doing innovative things for governments to waste their time preventing companies from making dumb business decisions. If a company like Apple wants to shoot itself in the foot after having built such a stellar business, I think it has earned the right to buy as many bullets as it wants.

Photo credit: Johan Larsson via Flickr.