Microsoft the evil monopoly
J J Gifford wants Microsoft punished (just in general), and Megan McArdle thinks it shouldn’t be (at least, for the reasons listed in the Netscape civil suit). But so far I haven’t heard a reasonable explanation of how consumers were (or even could be) hurt by Microsoft’s allegedly monopolistic practices, nor how consumers would benefit from breaking the company into pieces (or even stopping the monopolistic practices).
It’s important to note that everywhere along the way the anti-Microsofties assume that the important parts of the software industry are natural monopolies. They must be, otherwise Microsoft would be powerless to prevent competition. Usually this argument relies heavily on “network effects,” (although it doesn’t really have to) a theory that originated to explain why a single telephone network encompassing 100% of the population is a whole lot more valuable than 2 networks each encompassing 50% of the population (leaving half of the population unable to call the other half). In the software market the “network” is the convenience of a single platform for consumers, who can more easily share files, and software developers, who can concentrate their work on one platform.
But if the market itself is naturally monopolistic, what, exactly, is the point of splitting MS into three os companies? Eventually one of them will drive the other two out of business. It’s an especially harmful “remedy” if you really think that “network effects” create the naturalness of the monopoly. Not only are more resources than necessary used when producing the two losing products, but consumers are also hurt by not having the single platform that they prefer.
Even breaking MS into separate os and app firms is of dubious consumer value. It’s an economic commonplace that if upstream and downstream industries are monopolistic, both consumers and the firms themselves are better off if one firm makes both products. Otherwise both end up be overpriced, even by the monopolies’ preferences. (That’s a little more sophisticated than Econ 101…Econ 311, as I recall).
A monopoly can’t be extended into a competitive industry, either. That’s also an Econ 311 commonplace. “Bundling” IE with Windows might help Microsoft get the browser monopoly over Netscape, but it can’t make a monopoly out of what would otherwise be a competitive market. So how are consumer’s harmed by Microsoft rather than Netscape having the monopoly?
One thing that will definitely harm consumers, though: A government edict that a software product must contain features X, Y, and Z, AND NOTHING ELSE. I’m not that old. Surely others also remember DOS being savaged by the Unix gurus for not having enough features, thus leaving too many important tasks to third party vendors. Since when is Unix circa 1985 the feature defining os? Microsoft may well be dissembling when they argue that the browser is such an integral part of the os that they can’t realistically remove it. But the government shouldn’t be the ultimate arbiter of those decisions.
It’s important to note that everywhere along the way the anti-Microsofties assume that the important parts of the software industry are natural monopolies. They must be, otherwise Microsoft would be powerless to prevent competition. Usually this argument relies heavily on “network effects,” (although it doesn’t really have to) a theory that originated to explain why a single telephone network encompassing 100% of the population is a whole lot more valuable than 2 networks each encompassing 50% of the population (leaving half of the population unable to call the other half). In the software market the “network” is the convenience of a single platform for consumers, who can more easily share files, and software developers, who can concentrate their work on one platform.
But if the market itself is naturally monopolistic, what, exactly, is the point of splitting MS into three os companies? Eventually one of them will drive the other two out of business. It’s an especially harmful “remedy” if you really think that “network effects” create the naturalness of the monopoly. Not only are more resources than necessary used when producing the two losing products, but consumers are also hurt by not having the single platform that they prefer.
Even breaking MS into separate os and app firms is of dubious consumer value. It’s an economic commonplace that if upstream and downstream industries are monopolistic, both consumers and the firms themselves are better off if one firm makes both products. Otherwise both end up be overpriced, even by the monopolies’ preferences. (That’s a little more sophisticated than Econ 101…Econ 311, as I recall).
A monopoly can’t be extended into a competitive industry, either. That’s also an Econ 311 commonplace. “Bundling” IE with Windows might help Microsoft get the browser monopoly over Netscape, but it can’t make a monopoly out of what would otherwise be a competitive market. So how are consumer’s harmed by Microsoft rather than Netscape having the monopoly?
One thing that will definitely harm consumers, though: A government edict that a software product must contain features X, Y, and Z, AND NOTHING ELSE. I’m not that old. Surely others also remember DOS being savaged by the Unix gurus for not having enough features, thus leaving too many important tasks to third party vendors. Since when is Unix circa 1985 the feature defining os? Microsoft may well be dissembling when they argue that the browser is such an integral part of the os that they can’t realistically remove it. But the government shouldn’t be the ultimate arbiter of those decisions.
posted by Scott at
8:15 PM
