Feature:Microsoft's Move

I typically avoid posting stuff about TMS, but Lewis A. Mettler has submitted a really excellent one eplaining Microsoft's position as a monopoly, and some of the implications of it. It's a worthwhile read, and discusses a some of what might happen with DOJ.

The following was written by Slashdot reader Lewis A. Mettler

Is Microsoft making its big move now?

When you listen to economists they tell you that the reason monopolies are bad is because they can exercise their marketing power in such a way as to harm consumers. The idea is that without competition abnormally high prices can be charged or (by way of bundling and product tie-ins) customers can be forced to pay too much for the products they want or forced to pay for products they do not want.

Sometimes these kinds of comments sound a lot like the proverbial phase "the sky is failing, the sky is failing". And, I must admit that arguing that one thing or another should be done because of what might happen does ring a little hollow.

But, what if a monopolist is acting right now to force higher prices or force the sale of unwanted products?

No monopolist will ever admit to doing that, of course. No monopolist is going to announce that they are charging a higher price simply because they think they can force the consumer to pay it. No monopolist is going to announce that they are bundling an undesired product with a required one, just to force the sale of both products on all customers. During board room discussions however, this may in fact be the thought process. (After all, why market a product when you can just force the sale.)

A company may even hire an economists to advise them on just how high a price could be charged for a popular or required product before the net revenue is reduced. A company may hire an economists to advise them on how many lessor products can be bundled with a dominate one (thereby increasing the cost of the minimum package) before consumers will complain about the high priced deal. They may even hire economists to tell them the value of having a monopoly position in a new and growing market such as the internet.

However, if you are going to force products upon the consumer or charge high prices, it helps if you have a pitch or line that obscures your thinking. No company can afford to sound like a monopolist. In the software industry you have to sound like you support the wide distribution of highly innovative products (even if you are referring only to your own product line). You have to sound like you support lower and lower prices (even if the absolute price of your product remains contrary to the industry trend). And, you have to sound like you are just responding to the needs and wants of customers (even if you are only referring to a small number of customers and ISVs who are being subsidized by the rest of the consumers). And, somehow getting the word "free" in there can only helpeven if it is deceitful. Maybe you can even limit the free distribution to non customers (old machines and machines with foreign operating systems) but force your own customers to pay cash for the copy they must purchase.

Steve Ballmer was quoted recently they do not plan to give away software. I guess the quote was "Can we provide our products for free? The answer is no.". (I guess Steve forgot all about that pitch that "IE is free". So is IE free or not free? Which one is the lie?) Yet is not one of the arguments in court that Microsoft is doing nothing to stop the distribution of the Netscape browser? Does Steve really think that Microsoft has the right to force the sale of IE upon Microsoft customers for cash but that Netscape does not have the right to sell their product at any price? And if not bundled with the OS like Microsoft, Netscape would have to give their software away for free.

Recently an attorney for Microsoft was quoted as saying in court, "Nowhere in the antitrust statutes does it say a product maker should disable one functionality [in a given product] so that someone else can provide it." It is true that the antitrust statutes do not say that. However, the suggestion is that Microsoft should be able to include any functionality they want into the OS so that no other company need to bother developing it. (Or, if they do, they must do so in a free product or only if they can convince the customer to pay additional money for the duplicate capability.) In other words, Microsoft via their arguments in court is suggestion that Microsoft and Microsoft alone is the only company that has the right to develop computer software and sell it. (All they have to do is blend it with the OS.) By the way, Mr. Attorney for Microsoft, the antitrust laws list no acts which can not be considered an antitrust activity. It lists nothing that must be free of antitrust liability. In fact any act can violate the antitrust laws whether it is otherwise illegal or not.

I guess Microsoft no longer knows the difference between an operating system and an application. I guess Microsoft has decided that the best way to force the sale of an application is to play dumb.

If Microsoft can just convince the court to allow it to force the sale of the browser, then it can also force the sale of any other product they choose. Any product. As the core OS drops again in price, they can just integrate ("bundle") the Office Pro Suite. Or they could just bundle Money98. After all, everyone can benefit from a money program, right? And, the Flight Simulator? I am sure Microsoft can put together a "games bundle" that every computer users must want. Besides it is easy to design and Flight Simulator and the Microsoft spreadsheet so that both must be installed for either to be of any use. And, of course, they could just line up a few select customers for each of these products and have them claim "they asked for it". They could even line up a few ISVs who could testify that forcing all customers to have the foundation in place for their add-ons certainly makes their business easier (which it does). And making ISVs happy at the expense of Microsoft customers is good business, right?

Monopoly force in the market is just that. Microsoft picks the applications it wants to sell and the Microsoft consumer must pay. Today it might be the browser. Tomorrow, Microsoft gets to pick another one. The day after, yet another one. And, another one. Customer choice is no longer relevant.

Lewis A. Mettler, Esq.