Re: Bundling and operating systems

["Lewis A. Mettler" <lmettler@lamlaw.com>]

Eric,

Eric Lee Green wrote:
> 
> On Sat, 18 Dec 1999, you wrote:
> > > 1) Every modern operating system currently being shipped comes with a web
> > > browser, generally integrated into the OS in some way. Even hoary old SCO
> > > Unix, last of the "old line" Unix systems, now comes with a bundled web browser.
> > > Even for people who do not use the Internet capabilities of the browser, it is
> > > still being used for viewing help files, filesystem browsing, etc.
> 
> > Is this logic supposed to offset the harm cause to consumers?
> 
> As mentioned elsewhere: if 51% of customers want a capability, then they are
> getting the product cheaper if it's bundled. 

Where did you get that idea?  Microsoft can set price anywhere it wants.

> First, the cost is being spread
> across the whole customer class. 

Consumers do not pay the cost.  They pay the retail price set by a
monopolist.

Word costs less than the suite disproving your idea.

Windows without IE will always be cheaper than with it bundled unless a
monopolist can manipulate prices and prevent competition.

> Secondly, the company saves money on
> packaging, stocking charges, store shelf space purchases, marketing costs,
> accounting, etc., and can pass that savings on to the customer.

Microsoft sets retail prices.  Period.

No suite I know of costs less than the separate products they contain. 
Again your theory is proven incorrect.

> 
> In short, if 51% of customers want a capability, then the majority of customers
> benefit from the bundling.  But you do raise other issues.

Sorry.  Consumers do not vote in order to decide who will be screwed.

Answer the harm caused to Bill Gates.

> 
> > 1) those who do not want a browser
> 
> A minority in today's Internet age. Most iMacs, for example, are purchased in
> order to browse the Web (Apple marketing data confirms this, according to at
> least one Apple advocate that I've seen posting).

So what?

If most Fords are painted green does that mean you can be forced to buy
a green car?

> 
> > 2) those who might want one but already have one (see the Bill Gates
> > piece)
> > 3) those who might want one but prefer their own choice
> 
> I believe that #3 is the main problem. 

Millions fit #1.

80% of all consumers fit into #2.  Actually everyone fits in #2 if they
want a browser at all.

> Microsoft's current OEM contracts do not
> allow OEM's to bundle whatever browser they want with the operating system.

Hence the harm.

> Compaq, for example, might want to bundle Netscape as the default browser --
> that is, have Netscape as the browser icon on the main screen, Netscape as the
> default browser evoked whenever an HTML file is encountered, etc.  Microsoft's
> current OEM contracts do not allow OEM's to bundle whichever browser their
> customers are demanding (as is demonstrated by the now-famous contract
> cancellation letter that Microsoft sent Compaq when Compaq dared put Netscape's
> icon out there on the desktop).
> 
> I believe that OEM's should be allowed to bundle whatever programs with the OS
> that their customers desire, in the manner that customers desire. As a vendor
> my goal is to please my customers, and Microsoft's policies would prohibit that
> (if I were a Microsoft vendor, which, thankfully, I am not).

Then you should be arguing for unbundling not the other way around.

If you unbundle then OEMs can repackage in more than one configuration
as they see fit.

> 
> > Bundling always causes two affects:
> >
> > 1) the price in increased to cover the cost
> 
> The price of a specific instance of the product is increased to cover the cost.
> But the price, ON AVERAGE, of the solution that consumers buy may actually
> decrease, due to the decrease in packaging, manufacturing, marketing, and
> distribution costs.  It depends upon how many consumers want the functionality
> that is proposed to be bundled.

Sorry.  Harm is measured by the individual consumer not averaged.

> 
> > 2) choice is removed from the consumer in both the short and long run
> 
> Only if consumers are not given the choice to use alternatives. Microsoft's OEM
> contracts clearly deprive consumers of that choice, and thus are
> anti-competitive.

Choice of brand and choice of none at all.

> 
> > Therefore, I repeat, anyone who argues for bunding is only attempting to
> > harm consumers.
> 
> Beware of blanket statements. They are usually used by people who are more
> interested in bluster than facts. That includes this blanket statement (grin).

When they are true they are left setting right there as you have.

<snip>

-- 
Lewis A. Mettler, Esq.(Attorney and Software Developer)
lmettler@LAMLaw.com
http://www.lamlaw.com/ (detailed review of the Microsoft antitrust
trial)