The Other Side

[charles mueller <cmueller@metrolink.net>]

          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
  
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  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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