Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
WASHINGTON, DC, November 12 , 1997 — The Competitive Enterprise Institute (CEI) suspects that Ralph Nader does not speak for all consumers in his current crusade against Microsoft.
Nader is hosting a November 13-14 conference in Washington, D.C entitled "Appraising Microsoft and Its Global Strategy." Designed to elicit public support for federal antitrust action against the company’s expansion of computer services, "Appraising Microsoft" features speakers prominently drawn from the ranks of Microsoft’s rivals.
According to Nader and some competitors, Microsoft’s offering of its web browser free with the Windows 95 operating system is only the latest in the company’s long line of "offenses." Yet consumers consistently benefit when more and better features are added to computers. As noted in the Washington Post, the computing power of today’s $2,800 "Wintel" would have required a multi-million-dollar Cray supercomputer a decade ago. Indeed, "voting" with their mouse button, consumers have voluntarily downloaded millions of copies of Microsoft’s new web browser.
"The Competitive Enterprise Institute hopes the media covering ‘Appraising Microsoft’ will maintain a healthy skepticism and explore who really gains if the government substitutes its will for the free choices of individuals in the marketplace," CEI fellow Wayne Crews noted. "Antitrust authorities must guard against Microsoft’s rivals’ efforts to ‘compete’ in court to achieve what they couldn’t by consumers’ voluntary consent.
"Ralph Nader’s brand of ‘consumer advocacy’ is confusing," Crews noted. "When outside crusaders and government forcibly limit consumers’ free choices and slam the brakes on a torrent of low-cost features, they increase consumer prices and prop up less-efficient competitors." Crews continued, "This is not pro-consumer behavior, it is merely anti-Microsoft behavior."
"Consumers have spoken, and there is nothing amiss in their having chosen an operating system standard that some happen to despise," Crews concluded. "Let’s hope Ralph Nader hears consumers more than the complaints of competitive also-rans."
To address some of the common complaints against Microsoft, CEI today also released the attached two-pager "Five Myths About Microsoft."
Five Myths About Microsoft*
(Note: The following "myths" apply to many of today’s supposed examples of "lock-in" of allegedly inefficient technologies. Microsoft happens to be the most prominently cited example of the phenomenon.)
Leveraging Windows to Dominate the Browser Market Represents Unfair Competition: A popular myth today is that a savvy company can routinely leverage a "monopoly" in one product to force on consumers a product that they do not want. Companies lack this ability. Microsoft was unable to sell consumers on its Microsoft Network rival to America Online -- even though MSN had been "bundled" with the Windows 95 operating system. Similarly, Microsoft Money still lags behind Quicken. And as Netscape learned the hard way by bundling its Navigator browser with its Communicator suite, and as Apple leaned by bundling its entire computer with its operating system, bundling products doesn’t work unless consumers want the bundling. In any case, Netscape, not Microsoft, dominates today’s browser market, and retains every opportunity to maintain dominance by satisfying customers. In a sense, browser competition could hardly be more perfect: Because downloading Netscape’s Navigator or Microsoft’s Internet Explorer is equally simple, either firm will have to win on the basis of superior features.
Microsoft Illegitimately Dominates Operating System Software: Microsoft’s rivals tend to imply that Microsoft’s operating system is utterly impervious, seemingly as if it dropped out of the sky unbidden. Rather, rivalry among operating systems for desktop dominance has been and still is intense. Microsoft’s operating system dominance was not pre-ordained. Nothing prevented Sun, whose UNIX operating system was developed ten years before MS-DOS, from transferring that technology to the early PC marketplace. Nor did anyone force Sun to wait until 1991 to finally introduce a version for the Intel x86 platform. No one forced Apple back in 1984 to take the course it chose in not licensing its operating system to others as Microsoft did. There is nothing unseemly about one competitor winning out over the others and setting a standard. That was the purpose of the nearly 20 years of protracted battle, during which consumers made their choice.
Microsoft is Illegitimately Monopolizing the Internet: Some claim Microsoft’s proprietary knowledge and policies on sharing information about its operating system are oppressive and geared toward helping Microsoft dominate the Internet with its own software. But on the other hand, it would appear that, while application developers do depend upon Windows 95, Microsoft in turn has a stake in nurturing developers’ success rather than in undermining them. But for the sake of argument, take the critics at their word: If such dissatisfaction with Microsoft is indeed universal, then the market is ripe for moving to a new platform – just as we moved rapidly from vinyl records to compact disks. There’s no need for government to step in if a problem really exists: If Microsoft ($9 billion in 1996 revenues) were untrustworthy, nothing prevents the formation of consortia between developers and (for example) Compaq ($18 billion), Sun ($7 billion), and Apple ($8 billion) and others to offer consumers their allegedly superior hardware and software alternatives. Indeed, competitors by their own account already have another option. Given their glowing claims about the superiority of Sun’s Java programming language -- which allows programs to execute in Netscape’s browser on any operating system -- competitors should simply issue applications programs in Java format and be done with it. Otherwise, consumers retain the right to deal unobstructed with Microsoft to secure the services that competitors cannot yet provide. (Moreover, nothing precludes the future creation of rival "Javas" that work better.) Longer term, particle physicist Michio Kaku in his book Visions anticipates a future of 1-cent microprocessors as plentiful as scrap paper, a world where desktop computers will be only one among myriad devices connected to the Internet. Additionally, as engineers approach the physical limits of silicon chips, revolutions in quantum computing and DNA computing will change the competitive landscape. Microsoft has no obvious advantage in such a world, though it should be free to offer services there.
The Consent Decree with the Justice Department Should Preclude Bundling a Web Browser With Windows: A technical legal debate exists over whether the bundling of Microsoft’s browser is an allowed enhancement to the Windows operating system, or whether it is a disallowed "separate product." One problem with the claim that Internet Explorer is not allowed under the consent decree is that the browser was offered with Windows 95 at the outset. But most relevant, such arbitrary distinctions interest only those with a stake in using government force to overrule customers’ free choices. In a free market, products must evolve and be "bundled" as consumer demand and convenience requires. Making artificial distinctions between the retrieval of data on the hard drive vs. on the Internet is counterproductive, unfair and anti-consumer. Prohibiting Microsoft’s branching out into the Internet artificially cripples the company, just as did a former consent decree with Sears prevent it from anchoring stores in shopping malls.
Microsoft Borrows and Doesn’t Innovate: Subjective criticisms about whether a company is an innovator are hardly grounds for police action and completely irrelevant to an antitrust proceeding. What matters as far as free markets are concerned is the ability to meet needs and market one’s offering. The history of innovative business is one in which enterprising businessmen and engineers take the scientists’ inventions out of the laboratory and make them practical for consumers. Thus innovation need not equate with invention. For example, Microsoft indeed didn’t invent MS-DOS -- its key operating system during its early history -- but it purchased and owns it. Apple’s graphical user interface, typically regarded as having been copied by Microsoft, was actually "borrowed" from Xerox PARC by both companies. Neither "innovated," strictly speaking. Nonetheless, it is disingenuous to argue that any company’s ability to anticipate consumer needs in positioning and improving its operating system, word processing and spreadsheet software reflects a lack of innovation. A better definition of innovation is one that includes a company’s ability to deliver new services cheaply and efficiently to consumers.
CEI is a non-profit, non-partisan public policy group dedicated to free markets and limited government. For more information contact Wayne Crews at 202-331-1010.