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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.
  What to do about Microsoft?
       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
       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
       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
       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
       (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