In my antitrust experience, there are few things more helpful in
dealing with a monopoly case than to have the monopolist's side clearly
articulated. The issues are then sharply drawn and one knows exactly what
one's own burden of proof is.
The Competitive Enterprise Institute (CEI) is a right-wing
organization, heavily funded by money from the likes of the Olin and Schaife
foundations, and is devoted to the repeal of U.S. antitrust laws. Founded
by James Miller, Ronald Reagan's OMB director and then his FTC chairman, it
is in the business of paying-- handsomely paying (up to $500 per
hour)--so-called "scholars" to trash antitrust.
Ralph has said that his Microsoft conference of today and tomorrow
is but "a first step into a deeper and sustained inquiry" here. And of
course he is quite right. The right-wing case for Microsoft has been, it
seems to me, articulated especially well by the Reagan/Miller/CEI operative
who authored the following "5 Myths About Microsoft." The best service this
group could now render to the public interest, in my view, would be to see
if it can--by solid facts--overwhelmingly rebut these pro-Microsoft claims
of the political right.
Charles Mueller, Editor
ANTITRUST LAW & ECONOMICS REVIEW
http://webpages.metrolink.net/~cmueller
*************
The Competitive Enterprise Institute's
Five Myths About Microsoft*
(Note: The following "myths" apply to many of today's
supposed examples of "lock-in" of allegedly
inefficient technologies. Microsoft happens to be the
most prominently cited example of the phenomenon.)
Leveraging Windows to Dominate the Browser Market
Represents Unfair Competition: A popular myth today is
that a savvy company can routinely leverage a
"monopoly" in one product to force on consumers a
product that they do not want. Companies lack this
ability. Microsoft was unable to sell consumers on
its Microsoft Network rival to America Online -- even
though MSN had been "bundled" with the Windows 95
operating system. Similarly, Microsoft Money still
lags behind Quicken. And as Netscape learned the hard
way by bundling its Navigator browser with its
Communicator suite, and as Apple leaned by bundling
its entire computer with its operating system,
bundling products doesn't work unless consumers want
the bundling. In any case, Netscape, not Microsoft,
dominates today's browser market, and retains every
opportunity to maintain dominance by satisfying
customers. In a sense, browser competition could
hardly be more perfect: Because downloading Netscape's
Navigator or Microsoft's Internet Explorer is equally
simple, either firm will have to win on the basis of
superior features.
Microsoft Illegitimately Dominates Operating System
Software: Microsoft's rivals tend to imply that
Microsoft's operating system is utterly impervious,
seemingly as if it dropped out of the sky unbidden.
Rather, rivalry among operating systems for desktop
dominance has been and still is intense. Microsoft's
operating system dominance was not pre-ordained.
Nothing prevented Sun, whose UNIX operating system was
developed ten years before MS-DOS, from transferring
that technology to the early PC marketplace. Nor did
anyone force Sun to wait until 1991 to finally
introduce a version for the Intel x86 platform. No
one forced Apple back in 1984 to take the course it
chose in not licensing its operating system to others
as Microsoft did. There is nothing unseemly about one
competitor winning out over the others and setting a
standard. That was the purpose of the nearly 20 years
of protracted battle, during which consumers made
their choice.
Microsoft is Illegitimately Monopolizing the Internet:
Some claim Microsoft's proprietary knowledge and
policies on sharing information about its operating
system are oppressive and geared toward helping
Microsoft dominate the Internet with its own software.
But on the other hand, it would appear that, while
application developers do depend upon Windows 95,
Microsoft in turn has a stake in nurturing developers'
success rather than in undermining them. But for the
sake of argument, take the critics at their word: If
such dissatisfaction with Microsoft is indeed
universal, then the market is ripe for moving to a new
platform - just as we moved rapidly from vinyl records
to compact disks. There's no need for government to
step in if a problem really exists: If Microsoft ($9
billion in 1996 revenues) were untrustworthy, nothing
prevents the formation of consortia between developers
and (for example) Compaq ($18 billion), Sun ($7
billion), and Apple ($8 billion) and others to offer
consumers their allegedly superior hardware and
software alternatives.
Indeed, competitors by their
own account already have another option. Given their
glowing claims about the superiority of Sun's Java
programming language -- which allows programs to
execute in Netscape's browser on any operating system
-- competitors should simply issue applications
programs in Java format and be done with it.
Otherwise, consumers retain the right to deal
unobstructed with Microsoft to secure the services
that competitors cannot yet provide. (Moreover,
nothing precludes the future creation of rival "Javas"
that work better.) Longer term, particle physicist
Michio Kaku in his book Visions anticipates a future
of 1-cent microprocessors as plentiful as scrap paper,
a world where desktop computers will be only one among
myriad devices connected to the Internet.
Additionally, as engineers approach the physical
limits of silicon chips, revolutions in quantum
computing and DNA computing will change the
competitive landscape. Microsoft has no obvious
advantage in such a world, though it should be free to
offer services there.
The Consent Decree with the Justice Department Should
Preclude Bundling a Web Browser With Windows: A
technical legal debate exists over whether the
bundling of Microsoft's browser is an allowed
enhancement to the Windows operating system, or
whether it is a disallowed "separate product." One
problem with the claim that Internet Explorer is not
allowed under the consent decree is that the browser
was offered with Windows 95 at the outset. But most
relevant, such arbitrary distinctions interest only
those with a stake in using government force to
overrule customers' free choices. In a free market,
products must evolve and be "bundled" as consumer
demand and convenience requires. Making artificial
distinctions between the retrieval of data on the hard
drive vs. on the Internet is counterproductive, unfair
and anti-consumer. Prohibiting Microsoft's branching
out into the Internet artificially cripples the
company, just as did a former consent decree with
Sears prevent it from anchoring stores in shopping
malls.
Microsoft Borrows and Doesn't Innovate: Subjective
criticisms about whether a company is an innovator are
hardly grounds for police action and completely
irrelevant to an antitrust proceeding. What matters
as far as free markets are concerned is the ability to
meet needs and market one's offering. The history of
innovative business is one in which enterprising
businessmen and engineers take the scientists'
inventions out of the laboratory and make them
practical for consumers. Thus innovation need not
equate with invention. For example, Microsoft indeed
didn't invent MS-DOS -- its key operating system
during its early history -- but it purchased and owns
it. Apple's graphical user interface, typically
regarded as having been copied by Microsoft, was
actually "borrowed" from Xerox PARC by both companies.
Neither "innovated," strictly speaking. Nonetheless,
it is disingenuous to argue that any company's ability
to anticipate consumer needs in positioning and
improving its operating system, word processing and
spreadsheet software reflects a lack of innovation. A
better definition of innovation is one that includes a
company's ability to deliver new services cheaply and
efficiently to consumers.
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