In the roughly fifteen years since the iPhone's release, smartphones have rewired how people work, live, and play. These devices have changed how we interact and how we transact. While the devices and the experiences have evolved over time, innovation has been uneven, and at times muted. In the United States, the mobile operating system market is dominated by two players, Apple and Google, who differentiate themselves in the “openness” of their mobile platforms, meaning policy debates use a binary view of “open versus closed” to evaluate different offerings and the connected welfare effects.
A more useful framework, which we lay out here, is what we term the "mobile trilemma." The framework is adapted from Maurice Obstfeld and Alan Taylor's macroeconomic trilemma, which demonstrates the inherent tradeoffs economic policymakers face on three dimensions. Our approach applies this lesson to decisions within the mobile ecosystem on privacy, security and integration. We demonstrate how product design, soft-law standards, and hard-law regulations attempting to promote one corner of the trilemma will frequently fail to support, or more commonly detract from, the other corners.
The trilemma is intended to be a framework for understanding competition within the mobile ecosystem. Healthy competition should enable developers to differentiate their products and services by competing on any of the three dimensions, whether stronger privacy controls, stronger security assurances, or deeper integration. In our view, competitive churn is not in and of itself valuable, but rather that competition spurs a discovery process that disciplines gatekeepers, expands consumer choice, and drives innovation by adopting or adjusting product design with respect to one (or two) of these three dimensions.
