Microsoft And Monopoly

America's century-old antitrust law is increasingly irrelevant to our modern
global information technology market. This law is obsolete, in accordance to the
current Microsoft situation, because in the past there wasn't technology as
there is now. Recently the government has been accusing Microsoft as being a
monopoly. "Techno-Optimists" claim that "efforts by government to
promote competition by restraining high-tech firms that acquire market power
will only stifle competition." Some analysts disagree. They concede that
dynamic technology makes it tough to sustain market power. Still, consumers will
want compatible equipment, which will lead them to buy whatever product other
consumers are using, even if the product is inferior. Hence, is Microsoft a
monopoly or not? The range of views extends from the optimists who think that
changing technology removes the need for antitrust, to "middle-of-the-roaders"
who think that antitrust has always been and still is an important weapon in the
government's arsenal. Microsoft is not a monopoly. Our world of
telecommunications and information technology has brought about many changes in
many fields but new technology has neither extinguished nor revitalized the
reason for antitrust. There are monopolies that the government ought to control.

Those are the very monopolies that the government created itself. It is
government that creates monopoly power by erecting and maintaining barriers to
market entry. In the most recent dispute between Microsoft and the Department of

Justice (DOJ), Microsoft is accused of "tying-in" an Internet browser
into Windows. Microsoft's "tie-in" of its browser (Internet Explorer)
with its operating system (Windows 95) is a tie-in that shows no greater threat
to competition than the packaging of tires with cars, cream with coffee, laces
with shoes, even left gloves with right gloves. In actuality, tying arrangements
is pro-competitive. Consumers will buy the product that is more appealing to
their needs. Seven years ago the Federal Trade Commission began its
investigation of Microsoft's market power in the sale of operating systems for
personal computers. That investigation was later joined by the DOJ and pursued
vigorously by Anne Bingaman, then head of the Antitrust Division. The DOJ
uncovered one practice it deemed worthy of challenge. Microsoft licensed its

Windows software for multi-year periods on a "per processor" basis.

Which means that, Microsoft, to help prevent software piracy, insisted that
computer makers pay a royalty to Microsoft for each computer they shipped,
whether or not Windows was installed as the operating system. DOJ was not
persuaded by Microsoft's argument that physical machines can more easily be
counted than intangible copies of computer software. Nor was DOJ convinced that
customers might actually favor long-term contracts to guard against
unpredictable price increases and other uncertainties. This arose the question;
did Microsoft exploit its dominant market position by "insisting" on
"unfair" licensing arrangements? Of course not. Consider that Windows
became the industry standard because PC-makers thought it was a
"superior" product. An assessment that surely took into account the
entire set of product features. Not only technical features but also ease of
use, quality, price, service, and contract terms. Just like any other product in
the competitive market. Consider that there were no barriers that would prevent
another competitor from driving Windows out as being the market leader. These
are simple conditions that exist in an economic market. Those considerations,
apparently, did not impress the DOJ's Antitrust Division. After a five-year
investigation costing millions of dollars, the Antitrust Division found little
that could be characterized as anti-competitive. But that did not stop the
government. Not only did DOJ file an antitrust suit that caused Microsoft to
cancel its planned release of Intuit (a manufacturer of a popular personal
finance program) it also threatened to halt the release of Windows 95
(Microsoft's upgraded operating system). The head of the Antitrust Division,

Bingaman, was reportedly concerned about the link between Windows 95 and the

Microsoft Network (MSN), an Internet service provider intended to compete
against America Online (AOL). Whenever a user started a Windows 95 system, an

MSN icon appeared. Then one click of the mouse connected the user with the MSN
service. That packaging, according to DOJ, gave MSN an unsporting edge over its
online rivals. But a few more mouse clicks enabled any Windows 95 user to bring
up an AOL icon, which would appear automatically thereafter, at the same time as
the MSN icon. Satisfied with its discovery that MSN's edge could be neutralized,
the Antitrust Division abandoned its threat to block Windows 95. In result, MSN
now loses an estimated $200 million annually providing service to fewer than 3
million customers. On the other hand, AOL, has 9 million subscribers and will
add nearly 3 million more when it acquires Compuserve's