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This is exactly why Apple needs to pull out of a market that wants more competition within Apple's ecosystem. Because there already is competition (eg, Android), and by forcing Apple out of the market regulators will actually reduce competition. How does that help consumers when competition is eliminated?
The issue Australia has isn't with the iPhone per se... it's with iOS. If Apple allowed opening up its contact payment technology by allowing users to install Android, that still wouldn't be good enough for Australia. Even though that would give consumers the choice of an open (via Android) or closed (via iOS) contact payment technology, Australia would still be upset because to them it's not about whether the technology is opened or closed, it's about removing the choice for consumers to even have access to a closed technology.