Two Invoices Instead of One?

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There are a lot of benefits that typically come with breaking up a huge, oppressive monopoly. Think about how much better the automobile industry is, with a dozen gasoline companies instead of just one. What would cars be like today if all gasoline came from a vicious, Gatesian monopolist who watered down the gasoline every few years, forcing people to buy bigger and bigger cars, just to get bigger engines to overcome the weaker gasoline?

Most readers will surely recognize that this scenario closely parallels the anti-excellence brigade at Microsoft and their continual bloating and blighting of Windows. Every generation of Windows begs for greater and greater processor speed, more and more RAM, and larger and larger hard drives. All of this panders to Microsoft's *REAL* customers, the PC hardware makers. Since 90% of all operating system sales occur via pre-load, Microsoft knows which side its bread is buttered on -- generate artificially high sales for PC OEMs by prematurely obsoleting PCs every two or three years, and you can build a loyal base of corporate co-conspirators. If this happened in the auto industry, we would need 500 horsepower engines and 200-gallon gas tanks just to get to the grocery store.

Another example of the excellent results that come from breaking up monopolies is the case of telephone giant AT&T. Before the breakup, we had precious little bandwidth and no chance for high-speed modems, graphical Web browsers, or portable telephones. The greatest innovations in low-noise, high-bandwidth, multi-channel phone service have all come since the U.S. government broke AT&T into eight regional "baby bells". The Internet would still be locked up in some back office somewhere, priced way out of reach of the typical consumer, if not for the wise and just action taken to increase competition in the telephone marketplace.

All of which is well and good. But how applicable are these examples in the case of global software monopolist Microsoft?


By now, common sense should tell us that Microsoft's monopolist reign must be ended. There are very few software companies producing competition in the word processor, spreadsheet, and graphics markets, and no serious commercial competitors have entered these markets in the last five years. At the OEM level, the only non-Microsoft OS which is growing in market share is Linux, and that is a free, non-commercial enterprise. There are no commercial, for-profit operating systems that even approach profitability on the mainstream PC desktop, unless you include the various service and custom-design profit centers of an IBM OS/2 or other big-business product. We have seen a total blight in many software product categories, with investment capital empty and innovative ideas suffocated before the consumer could be given a chance to choose.

However, the petroleum and telephone monopolies were different from a software monopoly because they could be broken into geographically separate components. Software does not have geography, because it is not physical. The value of software is in its ability to cross boundaries, whereas physical telephone equipment and gas stations are immovable fixtures that supply physical infrastructure for moving materials, people, and information. Separating Microsoft into geographical divisions means nothing if an OS or an application can be "smuggled" over the Internet in the blink of an eye.

If Microsoft is to be divided, then how? Dividing MS into an OS company and an applications company misses the point: as long as the MS applications are tuned for Windows and the Windows OS is tuned for the Office applications, all we have done is make people write out two invoices instead of one. The connection between the OS and the applications is made in software, not in a physical warehouse where the boxes are stored, or in a physical store or even a preloaded hard drive where they are geographically close. Dividing Microsoft along software boundaries can only work provided ***the software is also divided***. A separate Microsoft company that makes Windows-only applications does not alleviate the monopoly; instead, a company that is only allowed to write Office applications for non-Microsoft platforms would be required. This way, Office becomes instantly available to other operating systems, quickly legitimizing them. Meanwhile, the Windows application market suddenly becomes a wide-open contest between non-Microsoft vendors.


To do what is currently proposed by the DOJ, namely, divide Microsoft into two companies without breaking the digital "glue" that binds together their respective software products, is going to be about as effective as separating two magnets. The only way to prevent them from quickly re-attaching themselves is to make sure that OTHER magnets are closer to the first two than the first two are to each other!!! Similarly, other applications must become "closer" to Windows than Office is, and other platforms must become "closer" to Office than Windows is.

Furthermore, the current proposed solution would not break Microsoft's stranglehold on OEM preloads. Operating systems and even office applications would still continue to be distributed through the hardware-based channel composed of new computers. A more positive and firm step to control Microsoft's aggression would be to ban the preloading of any Microsoft product with any hardware platform -- PC, handheld, and even server. Microsoft products could only be installed by choice, not be pre-emption. This would also show consumers the true cost of Microsoft products both in complexity as well as capital expense. The PC OEMs would thus have to offer something else as the default preload, making non-Windows platforms immediate players in the software marketplace.

That kind of breakup would at least have a good chance of succeeding. Yes, consumers would have some temporary pain, but in the long run the market would prosper. Competition and variety would return to the applications market, AND competition and variety would return to the OS market. Microsoft would also need to have one or two other little restrictions, such as being required to sell its browser separately from the OS and separately from other applications. And of course vaporware announcements and exclusive OEM deals would have to be abolished. File formats, protocols, and APIs would need timely publication. But without the full, software-based separation of apps and OS, Microsoft will simply write double the number of invoices and keep the monopoly churning away. Without removing Windows from the preload market, Microsoft maintains its ability to exclude other platforms from the mainstream buyer.


The problem of Microsoft's monopoly has never been about their right to success or innovation. It has always been about Microsoft's stated and tightly-focused goals of eliminating the ability of others to succeed or to innovate. (After all, what good is an innovation that you are prevented from bringing it to market?) The key to preventing Microsoft from abusing its power is to know and understand that these anti-competitive goals are written right into the code itself. By sabotaging its own products to reduce their compatibility with other platforms and with competing applications, Microsoft has custom-tuned its software to reflect its corporate mindset. The only way to undo the damage is to detune the software and open-standard its interfaces, and to offer alternative OS's as the default preload. In other words, to make people write THREE INVOICES INSTEAD OF TWO. Any breakup effort that focuses solely on an organizational change misses the mark.


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