Economist is surprisingly tough on MS.

[James Love <love@cptech.org>]

The November 13-19, 1999 issue of the Economist is surprisingly tough on MS.


http://www.economist.com/editorial/freeforall/current/index_ld3828.html

Now bust Microsoft's trust 

EVERYONE knew that the trial of Microsoft initiated by America's Justice Department had gone badly for the software giant. But the language of Judge Thomas Penfield
Jackson's "findings of fact" was still amazing in its severity. The judge concluded that Microsoft had used its prodigious market power and immense profits to stifle
innovation and to harm both consumers and any companies that dared to compete with it.

  [snip]

It has taken two years to get this far (see article). Allowing for normal legal delays, it could take another two before anything horrid is done to Bill Gates's company.
Yet what Joel Klein, the department's antitrust boss, now knows is that the judge's findings will form an unshakeable framework for the conclusion of the case. Appeals
courts cannot question Judge Jackson's assessment of the credibility of testimony. So powerful is his portrayal of Microsoft as a relentless and predatory monopolist that
his verdict, when it comes, will be very hard to overturn. 


   [snip]



http://www.economist.com/editorial/freeforall/current/sa0132.html

Microsoft's bosses did their best to put a brave face on Judge Thomas Penfield Jackson's damning "findings of fact". But there was no mistaking their shock at being called
a relentless and predatory monopolist

  [snip]


Software developers face large costs for every additional operating system to which they "port", or adapt, their applications. This means that, once an operating system is
dominant, developers have little reason to make their applications work with other operating systems. So any rival PC operating system would have had only a handful of
applications, compared with 70,000 or so that now run on Windows. Moreover, any users who abandoned Windows would have to scrap investments in software and training, making
the cost of switching prohibitive. The ballyhooed Linux operating system, which is free, has made inroads in the server market, but not on the desktop, for want of
applications. 

This applications barrier to entry gives Microsoft its enduring monopoly power. So strong are the effects that, even if Microsoft were to double the price of Windows, many
years might elapse before its market share fell from today's level of more than 95%. As it is, Microsoft can maximise revenues in the long run with little fear of
competition. 

Microsoft has sometimes argued that it is not a monopoly because it competes with itself by continually releasing "new and improved" versions of Windows. Yet Judge
Jackson's findings demonstrate both how Microsoft harnesses independent software vendors to create products that take advantage of new application program interfaces (APIs)
built into each release of Windows; and how PC makers are given no choice but to install the new operating system, at whatever price Microsoft decrees. 

  [snip]

The tone and relentless logic of the judge's findings are, says one antitrust economist, an enormously significant development. Despite Microsoft's hopes, each part of his
text has been written in such a way that his eventual findings in law, expected early next year, will be hard for any superior court to overturn. They also support the
widest possible range of remedies, including breaking the company up. 

Sceptics about the role of antitrust enforcement in the high-technology business may still argue that none of this matters, thanks to the "paradigm shift" that is being
brought about by the Internet. They may have a point-but the market is not changing nearly as fast as some enthusiasts believe. If Microsoft's power is already in
inexorable decline, why is it by far the most valuable company in the world? And why has its market value doubled during the 18 months which Judge Jackson has taken to
brand Microsoft a monopoly? 

 


-- 
James Love / Director, Consumer Project on Technology
http://www.cptech.org / love@cptech.org
P.O. Box 19367, Washington, DC 20036
voice 202.387.8030 / fax 202.234.5176