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Is Microsoft Repeating Its IE Mistake With New Windows Phones?

Microsoft (MSFT) has a long history of browser woes. And it’s not just the usual complaints about the performance or security risks of various versions of the company’s Internet Explorer web browser. The worst has been the years of legal wrangling and costly fines over Microsoft’s practice of forcing PC users to use IE.

windows phone google search

Source: Google

According to a report from The Verge’s Tom Warren, Microsoft could be starting down that slippery slope once again by removing the option to choose Google (GOOG) Search as a default on the first round of Lumia Windows Phone smartphones to be released under its ownership of the Nokia devices.

A Little Internet Explorer History

Microsoft began to run afoul of consumers, competitors and then regulators almost as soon as web browsers made an appearance in the mid-’90s.

Arguing that Internet Explorer was a feature of Windows, not a standalone product, the company bundled its own web browser with all Windows PCs, tying IE functionality into Windows and basically making PC owners jump through hoops if they wanted to use a competing browser.

The practice helped push Internet Explorer to dominate web browser market share, but led to lengthy and costly legal issues that have dragged on for well more than a decade. In 2013, Microsoft was fined another $731 million by the European Union after running afoul of a 2009 commitment to provide PC owners with a clear choice of web browser (MSFT released a Windows 7.1 Service pack that failed to provide a choice of browser display during installation).

In Mobile, Search is the New Browser

Smartphones are different from PCs. A smartphone arrives in a box with the operating system and core apps already installed, and each platform — iOS, Windows Phone 8.1, Android or BlackBerry (BBRY) — includes its own web browser by default.

What’s more critical is the search engine. Not only does the search engine directly impact the owner experience, but search and its related advertising is where the money is made.

Smartphones running Microsoft’s Windows Phone operating system use MSFT’s Internet Explorer browser, which is set to use Bing as its default search engine. Users could change a setting in Internet Explorer so that searching in the browsers address bar would use Google Search instead.

The Verge got its hands on unlocked versions of two new Nokia Lumia smartphones — the Lumia 930 and Lumia 630 — the first two devices that will be released under Microsoft ownership. In both cases, they discovered that the option to use Google Search had been disabled.

In other words, Microsoft appears to be forcing purchasers of new Lumia Windows Phone smartphones to stick with Bing as the default, with no way to flip to Google search (other than manually navigating to the Google Search website for every query).

That’s a problem, obviously. But it might not be as big as it originally seems…

The Google Search Antitrust Case

Google is in the midst of an antitrust case over default search practices that are much less restrictive than what Microsoft has done.

In Google’s case, the issue is that licensing of its Android operating system to smartphone manufacturers like Samsung (SSNLF) requires Google Search to be set as the default search engine on the devices.

Of course, as Reuters’ Dan Levine points out, Google Search can still be replaced as the default search engine by users. This makes Google’s move seem less blatant than what Microsoft seems to be trying to do with its new Lumia Windows Phone models.

Windows Phone is Not the Monopoly Windows Was

For Microsoft, having a monopoly or near-monopoly in market share has paid a large role in past and present legal actions. But the situation with smartphones is much different.

Practically owning the PC market brought Microsoft’s practices under scrutiny in the past. Android’s 80% share of the smartphone market has led to competitors filing complaints about Google Search and its prominent position giving GOOG an unfair advantage for scooping up lucrative search ad revenue.

When it comes to smartphones, Windows Phone is still a bit player at 3%, and that alone offers considerable protection — even though Microsoft is producing both the hardware and the software, it’s clearly not abusing an industry monopoly or near monopoly to its advantage.

Will Microsoft Back Down?

It’s tough to see any real advantage to Microsoft in banishing Google Search as a default option in Windows Phone. The platform’s market share is so small, doing so is hardly going to move the needle for search ads on Bing.

At the same time, it puts those Nokia Windows Phone Lumias at a competitive disadvantage when Apple (AAPL) iPhones and Android smartphones let users override search engine defaults with their own preferences.

And there’s always the risk that its past behavior with Internet Explorer and the Nokia purchase (which means Microsoft effectively controls the Windows Phone market) could spark renewed regulatory interest, this time in its mobile practices.

That Verge article was updated to reflect the fact that the Nokia 930 and 630 have been released to European carriers and in some cases, the Google Search option has been restored. It appears that MSFT may have blinked, or perhaps the carriers forced its hand. But it’s also clear that MSFT is experimenting with Windows Phone, and now that it also essentially controls the hardware for the platform, seems willing to play with fire — perhaps even repeating past patterns of behavior — in the name of boosting Bing over Google Search.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2014/07/windows-phone-msft/.

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