|
|
|
The Monopolist's Cookbook |
 |
|
LEVERAGING AND THE AVOIDANCE OF COMPETING ON MERIT |
|
I
|
n 1997, Microsoft announced its intention to fully integrate its web browser into the next version of Windows, currently due for release in mid-1998. Included in this newest version of Windows is a scheme for constricting how consumers will choose to access the Internet. Windows 98 will establish Internet Explorer as the "default browser" on all new PCs sold. A competing web browser can be obtained, installed and selected by the user as a substitute "default browser," but this exercise in personal preference requires a lot of extra trouble. And in order to throw an additional barrier in between the customer and their personal preferences, Microsoft has also insured that a non-Microsoft browser will be hobbled in such a way that it will function relatively inconveniently. According to this new scheme, in every instance where the computer operator clicks on a built-in system "shortcut" to visit a website, Windows will automatically send them there via Internet Explorer, no matter what choice the user has selected for the default browser settings. The reason: Microsoft says that Internet Explorer is now "part of the operating system." [San Francisco Chronicle, 13 July 1997] The browser has become so tightly "integrated," Microsoft claimed before a federal judge, that they can no longer remove Internet Explorer from the Windows operating system because the product and the operating system share so many files. To break them apart would destroy the functionality of both, according to Microsoft. This argument is rotten at its core, and it is a deliberate effort to distract attention from the real issue at hand: whether Microsoft should be permitted to integrate whatever functions it pleases into the operating system, irrespective of the impact of its actions on competitors. It cannot be legitimately argued that Internet Explorer is part of the Windows operating system because it in no way originated as an outgrowth of the operating system, and Microsoft even produces a version of Internet Explorer for the Macintosh to compete with Netscape's Macintosh products which is not part of any operating system. The web browser, as a generic piece of software, was developed independently of Windows. The first operational web browser was written on a NeXT computer. The browser was first marketed commercially by Netscape Communications, a company founded by some of the people who first took the browser from concept to product at CERN and at the NCSA. Internet Explorer, regardless of how many files it shares with a particular operating system, competes with other browsers for market share -- as Microsoft freely admits. It is in fact just another browser and, therefore, cannot be a "part" of the operating system. Inasmuch as Internet Explorer competes with other browsers for market share, it is in the same product category. Internet Explorer is no more a part of the Windows operating system than Netscape Navigator, regardless of its technical underpinnings. Microsoft can claim with some justification that, because it is so tightly integrated with the Windows operating system, their product has some performance advantages over other browsers. There is no need to write extra code within a web browser to perform functions that can already be performed by the operating system. Such integration may indeed provide a performance advantage, but is it a fair one? Should a company that makes an operating system be allowed to use its ownership of that operating system to give its own applications an advantage in the marketplace? Microsoft argues that it does, because the integration of products gives its customers better performance. Customers, of course, should feel neutral about this. They have no interest in Microsoft's products performing better than their competitors' products. Some people mistake Microsoft's claims about better performance for their products for claims about better performance in general, but this is not the case. Microsoft only wants their products to perform better than their competitor's products. Whether they do this by improving their own products or changing the operating system in such a way as to hurt the performance of competing products is unimportant. The result is the same. From a customer's perspective, the choice should not be an integrated Internet Explorer vs. an unintegrated Netscape Navigator -- it should be between two products with different features and different prices. They should be able to choose products on the basis of their value, not simply whether or not they are made by the same company that makes the operating system. If Microsoft did not have a vested interest in making their products competitive, they would give other companies' programmers the same access to the Windows operating system that Microsoft's programmers now enjoy, and with everyone competing on an equal footing, performance of all products would increase dramatically. Microsoft, of course, would argue -- despite evidence to the contrary -- that they would never do anything to hurt the performance of a competitor's product. They would argue that they must have the support of developers if the platform is to be accepted. That argument breaks down completely, however, when that operating system becomes almost the only operating system in use. Gaining acceptance of Windows is no longer an issue for Microsoft. At one time it was necessary for Microsoft to exercise a modicum of restraint in its competitive practices in certain areas to avoid alienating developers, but this is becoming increasingly less important, and their behavior reflects that fact. They buy out the developers they need and rake the others over the coals. So what's the difference between an operating system feature and an application program? Microsoft has deliberately blurred this distinction, but only to create a technical red herring. Microsoft knows that no workable technical definitions exist. The real distinction is historical: browsers should be regarded as applications, because that's how they started out. If Microsoft wants to integrate new functions into its operating system, fine. But browsing the web was not a new function when Microsoft decided to make it a feature of their operating system -- the concept was a successful product long before they even recognized its value. The integration scheme should be recognized for what it is: simply an effort to undercut a competitor. The stakes are very high: If Microsoft succeeds in transforming the essential competitive questions at hand into technical questions, they will be able to log-roll the competition endlessly, by employing leveraging techniques available only to Microsoft. If they decide to describe web browsers as part of the operating system today, why not spreadsheets and word processors tomorrow? The application of this logic is boundless, and Microsoft knows it only too well. Quite clearly, if Microsoft's version of the browser integration argument succeeds, a horrific precedent would result. Competition in the software industry would effectively be at an end. The solution? Microsoft should only add new functions to an operating system if they really are new. If Microsoft followed this rule of thumb, not only would an essential zone of competition be protected, but Microsoft would be forced to come up with genuinely innovative ideas -- rather than integrate borrowed old ideas into the operating system, and then drive the originators out of the market. Further, application software developers would be able to innovate and develop their ideas freely, secure in the knowledge that their products will be permitted to compete on their own merits. The payoff to consumers would be a flood of new products -- a relatively greater benefit than any Microsoft could ever offer with integration. Microsoft may be far beyond the point at which they can reasonably claim a need to engage in leveraging practices in order to provide new services to customers. Nevertheless, they insist on leveraging their operating system hegemony continually to gain unfair competitive advantages. If only by virtue of their size and dominance in personal computing software and operating systems, Microsoft owns the permanent home field advantage over its competitors, and probably will do so well into the next millennium. Consequently, they must learn to go the extra mile to respect competitive existing markets, not to use leverage to annihilate them. |
 |
|
 |
|
|
|
last revised: 22 April 1998 |