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Re: MSIE Browser
Matt Mercurio, responding to someone (not named by Matt), wrote:
> Excuse me? You're not giving the average Windows user enough credit.
> Windows 95 already comes inextricably "bundled" with that nasty MS browser -
> but the facts indicate scores of people still use Netscape.
I would agree with Matt that if Microsoft bundles an inferior product
in the OS, users will find a way to obtain a superior product. Examples
of this would be Cute ftp, a far superior shareware ftp client, Netterm,
a far superior shareware Telnet client (all and more available from the
excellent http://www.stroud.com software review site), or various email
or fax clients which are superior to the exchange or MS fax programs
built into Win95.
However, I think it is also the case that if Microsoft wants to
spend the money, it can create a client which, once bundled with the OS
will decimate the third party market, as has happened with many
utilities. Who buys Stacker (regardless of the patent suit) or Trumpet
winsock anymore? Moreover, there are credible (IMHO) complaints that
Microsoft can create types of OS integration that just are not available
to third parties, not to mention the reported cases where the OS seems
to deliberately create problems for competitor's products.
Some of this concerns the ability of Microsoft to closely control
access to information about the underlying code (undocumented features
of the OS), and to closely control information about the future
evolution of the OS, which creates problems concerning upward
compatibility. Indeed, in our interviews with MS competitors in the
applications markets, they often express fear that public criticism of
MS will result in their exclusion to developer meetings, where such
information is shared. MS is also able to demand that its competitors
provide detailed plans regarding future products, when it discusses
issues relating to revisions in the OS. This is an unnerving experience
for an MS competitor.
What is the best evidence that Microsoft benefits from its control of
the OS environment? Look at what MS is doing in the browser market.
Why would MS spend tens of millions (who knows how much) to create a
multifunctional behemoth application like MSIE 4.0, which takes as much
as 60 megabytes on your hard disk, and give it away for free, even to
corporate customers? This isn't the business model for most MS
applications. MS doesn't give away Win95 or MS Office.
MS is giving away and bundling MSIE 4.0 because it wants to continue
its monopoly on knowledge of the underlying code for the relevant OS for
Internet applications. Why is this monopoly valuable, when the product
itself is given away for free? Because it gives MS advantages, big
advantages, in the applications market, and permits MS to dominate the
standards setting process.
It isn't necessary to have 100 percent success for a practice to be
considered sufficiently pernicious to warrant government intervention.
For example, American Airlines had a monopoly on the online system for
airline reservations. It sorted fares alphabetically. This didn't stop
travel agents from booking flights on non AA flights, but it was
certainly a great advantage to AA, which always appeared at the top of
the screen. The government forced AA to change this to provide a more
level playing field, and this has benefited consumers. We could have
waited for the market to solve (nor not solve) this problem itself, but
the government's actions (adopting conduct rules) were both appropriate
Is there a substantial public interest in conduct rules that inhibit
MS's natural and understandable motivation to use its monopoly on the OS
in anticompetitive ways? I think there is. Others may not agree.
> The point is that [. . . ] claims about detrimental effects on
> Netscape/diversity/whatever brought about by OS/Browser bundling are just
> that: Claims. Just because you are not a lawyer or an antitrust professional
> does not exclude you from supplying the relevant analysis from those fields to
> support your arguments. So,
> -->HOW EXACTLY WILL MICROSOFT'S ACTIONS EXCLUDE NETSCAPE FROM THE MARKET?<--
> Please be objective and specific.
Responding to your challenge to another member of this list,
allow me to suggest that the fact that MS is charging a zero price for
its product has a non-zero effect on investment in commercial browser
clients. My analysis is based upon the theory that investors seek
returns on investments, and prices which approach zero don't yield much
return. As a "Senior Economist" for Economists Incorporated, this must
have occurred to you, even before this thread took place.
What is the business model for Netscape, with respect to browsers? To
hope that it too can spend millions of dollars on the development,
update, and marketing of a product that competes with a free MS
offering? Of course, the MS offering isn't really free to the
consumer. MS itself books the costs of the MSIE development and upgrade
against the income from Win95 and Win NT sales, in their SEC filings.
It is free only in the sense that the cost of using it is zero, once one
purchases the OS.
Does Netscape face the same incentives as MS, and can Netscape hope to
capture future rents from a free browser market, should it succeed in
fighting of the bundled MSIE? Not straight up. MS is the incumbent
firm defending huge market shares in desktop applications, which
increasingly are looking at Internet functionality. To the degree that
Netscape can reduce the MS monopoly power, by providing an non MS
controlled platform for Internet applications, Netscape is not in the
position to capture the rents that MS may lose.
Finally, do your really deny that deep OS integration with the browser
can marginalize a competitor's products? Have you ignored decades of
research on issues relating to telecommunications, software and computer
networks? What is your claim to expertise in this area?
> -Matt Mercurio
> Senior Economist, Economists Incorporated
> Washington, DC
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