Based on what I’ve read so far, it seems to me the biggest challenge the DOJ has in its lawsuit against Apple is convincing a court that there is such a thing as a premium smartphone market. In my opinion what the DOJ really means by a “premium smartphone market” is an iPhone market, in fact I think DOJ would have been smart to actually call it the iPhone market.

What defines a market? From a traditional lense, one may say there is no such thing as an iPhone market. However, the iPhone is not just a product, it also includes the App Store and accessories like the Apple Watch that are exclusive to the iPhone. Apple and most of the tech industry refers to this as the Apple or iPhone ecosystem and that ecosystem functions in ways that most will recognize as a market. Apple clearly uses monopoly power in its control of the iPhone ecosystem.

If one accepts the iPhone ecosystem is a market then I think Apple most clearly has a monopoly. While I am not even close to being a lawyer, I would think the next step is to convince a court that the iPhone ecosystem/market is large enough to cause harm to a significant number of U.S. citizens to justify government action. Unlike in Europe, antitrust in the U.S. is about harm to consumers and not harm to competitors.

So, if I am right, I think the big question being raised by the DOJ is a question about whether a product ecosystem is a market. The product ecosystem is fundamental to Apple’s business model, and frankly many people benefit from that ecosystem. In some ways the issue of product ecosystems and antitrust has occurred before. At the time when phones were only landlines one could only buy a phone from AT&T and a DOJ lawsuit forced AT&T to allow consumers to buy phones from other manufacturers. I am sure at the time AT&T considered the phones as part of their product ecosystem and AT&T did claim security and quality reasons for why they should be the exclusive providers of phones.

Despite what Apple says, they will fight this suit because the App Store and exclusive accessories like the Apple Watch are competitive advantages. Both are big revenue streams and Apple takes actions to protect those revenue streams. Apple has stated this approach is a fundamental part of their business model.

Consequently another big question being raised here is, if a company makes a product that is a platform for selling other products, is the owner of that platform allowed to be the exclusive store front for those products and require a portion of each sale of that product? HP makes more money selling ink for their printers than in selling printers; Gillette makes money selling razor blades and practically gives away their shavers. Should a manufacturer of a computer platform be allowed to have an exclusive app store that is the only way for one to install apps on that platform? The EU has said no, now the United States is attempting to say the same thing.