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What to do about Microsoft? LE MONDE DIPLOMATIQUE - November 1997
The following is an article which appeared in the November 1997 issue of
Le Monde Diplomatique. It was written before the US DOJ law suit on
Microsoft's violation of the 1995 antitrust consent order. The article
was written in english, translated into french, and translated from
french back into english.
Jamie
LE MONDE DIPLOMATIQUE - November 1997
What to do about Microsoft?
by RALPH NADER AND JAMES LOVE *
Microsoft is the world's most important information services
company. This is not a result of its size - many firms are larger
in gross revenue (1). Nor is it a consequence of its products -
there are many firms that are more innovative. Microsoft is the
most important information services company simply because it
controls the software foundations for nearly all programs that run
on personal computers today, and because Microsoft is using this
control to launch a dizzying assault on mass market software
applications, information services, electronic commerce and
publishing ventures.
The success story of its founder, Bill Gates (2), should not
obscure the reasons for the company's dizzy rise. Today, experts
estimate that Microsoft controls about 90% of the market for the
operating system software (OS) which is used to run personal
computers. Moreover, Microsoft controls nearly the same 90% market
share for popular applications such as Word Processors,
spreadsheets, presentation graphic programs and relational
databases - the components of the "suite" of office applications
that it bundles to consumers.
But Microsoft has rarely been the innovator in markets. It
purchased MS-DOS, the PC's first operating system, from another
firm. The graphic user interface Windows was based on the Apple
Macintosh, which Apple itself had imitated from an early computer
by Xerox. Excel, the Microsoft spreadsheet, is an imitation of
Lotus 123, which was in turn an imitation of VisiCalc.
Microsoft Word was introduced into the market long after several
other popular word processors. Microsoft's Power Point imitated
programs such as Harvard Graphics or Freelance, and Microsoft used
acquisitions to buy itself into the relational database market,
where it was a late entrant.
While Microsoft was typically late for the dance, it rarely left
empty-handed. Today, Microsoft so completely dominates each of
these markets that few venture capitalists would even consider
funding new programs that would seek to dislodge it. Microsoft is
not only successful, it seems unbeatable in the PC applications
markets.
Microsoft has succeeded in part because its management was willing
to spend enormous resources to improve its products, which were
often poor performers in the early releases, and also because it
excels in marketing its products.
But Microsoft has also engaged in practices which are often
described as predatory or anti-competitive, such as the continual
manipulation of the proprietary operating system to undermine
rival's products, selective dissemination of information regarding
the operating system's current and future functionality, the
bundling of weak products with essential products,
pre-announcements of non-existent products to discourage consumer
purchases of rival goods (sometimes referred to as "vaporware"),
raids on key company staff from other companies.
No to mention an advertising strike force which targets specialised
media (3) and predatory pricing of products to deprive rivals of
revenue. Microsoft's power and its reputation for ruthless
anticompetitive actions has demoralised most of its rivals.
Not in the public interest
Now, after Microsoft has defeated a large number of creative and
innovative firms to reign supreme in the entire range of desktop
applications, it is turning its attention to the Internet - another
area where Microsoft made a late entrance.
Bill Gates' empire is seeking to "own" the interface and operating
system which connects computer users to the Internet. It is doing
this by spending mega dollars on the development of the Microsoft
Internet Explorer (MSIE), which it distributes as a free product
(now included in the Microsoft basic operating system) in
competition with Netscape, the only firm which is still trying to
compete with Microsoft in the Internet browser market. If Microsoft
succeeds in driving Netscape and other companies from this market,
it will be in a position to use its monopoly to control future
standards which are essential for Internet-based publishing,
information services and electronic commerce, and Microsoft is
expected to continue its efforts to transform the Internet into a
much more closed and proprietary system - owned by Microsoft.
Microsoft is also engaged in a battle with Sun Microsystems over
standard setting for Java, a computer language which was invented
by Sun. Sun is one of the few companies that are still willing to
openly challenge Microsoft on issues central to Microsoft's core
business. Today, programmers face the costly and difficult problem
of writing separate programs for different types of computers and
software operating systems. Often programmers elect to only write
programs that run on the 90% of personal computers that use
Microsoft operating systems. Sun designed Java as a "Write Once Run
Anywhere" system. A program written in Java is supposed to run on
any computer, regardless of the hardware or software. This
undermines Bill Gates' monopoly power.
Microsoft is attempting to neutralise Java through the same
"embrace and extend" strategy which it is using to corrupt the open
standards which have been traditionally used for Internet
publishing. Microsoft adds features to its version of Java which
will only work with the Microsoft operating system. If enough
programmers exploit these features, their Java programs will only
work on programs running Microsoft's software. Dan Nachbar, a high
tech investment advisor, says this is to embrace and extend like an
anaconda.
Is Microsoft's monopoly in the public interest? Some say Microsoft
is a blessing because it has given us inexpensive software and made
it easier for consumers to share and exchange documents and data.
However, we should recall that low-priced consumer software was
pioneered by Borland and other software companies, and that the
Internet has vastly enhanced the sharing of data on a system that
was designed to be open and competitive.
But in every field where Microsoft has gained overwhelming
dominance, there has been a dramatic decline in innovation. Venture
capital has dried up for software products that compete head to
head with Microsoft, and venture capital is drying up for products
that may in the future become targets of Microsoft. The company
will soon be in a position to close the open system upon which the
Internet has flourished as a platform for new innovation. If
Microsoft monopolises the user interface for the Internet, it can
bias the selection of content and services, which will create new
opportunities for Microsoft to partner with various industry
sectors, while rendering Internet commerce less competitive, thus
harming consumers. Apart from economic considerations, we believe
society is harmed by excessive concentrations of power
Society is not powerless to deal with this new digital age
monopoly. Consumers, software developers and governments can take
concrete actions that will restrain Microsoft's monopoly power and
enhance competition. Government action is clearly appropriate.
Anti-trust authorities in the European Union and the United States
need to act now to prevent Microsoft from extending its current
monopoly on the operating system for desktop computers to the
browser platform for Internet services.
In addition, government procurement authorities should allocate
part of computer budgets for systems which use non-Microsoft
software, to enhance competition. It should be forced to separate
its operating system from its applications, and anti-trust
authorities should review and constrain Microsoft's decisions
regarding building of applications with its operating system, and
monitor predatory practices. Microsoft should be enjoined from
mergers and acquisitions which lead to too much power in
determining standards for Internet multimedia and electronic
commerce
The United States has requested courts to sanction some of
Microsoft's practices. It is now the turn of Europeans to conduct
their own reviews of its practices. The future of digital
communications in now at stake.
* Ralph Nader is a consumer advocate in the United States. James
Love is an economist, at the Center for Study of Responsive Law's
Consumer Project on Technology, Washington
(http://www.cptech.org).
______________________________________________________________
(1) In 1996 Microsoft's sales ($11.3 billion) were only a fraction
of Mitsubishi's ($752 billion).
(2) Bill Gates, 41, founded Microsoft in 1975 and still owns 22.3%
of its shares. This stake (worth $36 billion in December 1996)
makes him "the richest man in America".
(3) Serge Halimi, "Une presse libre", Le Monde diplomatique,
September 1995.
* Please visit the on-line English edition of Le Monde diplomatique!
* http://www.monde-diplomatique.fr/en/
--
James Packard Love
Consumer Project on Technology
P.O. Box 19367, Washington, DC 20036
202.387.8030 | fax 202.234.5176
love@cptech.org | http://www.cptech.org