November 2002

"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court." -- Sherman Antitrust Act, U.S. Code Title 15

"Therefore law grows numb, and justice never goes forth. Because the wicked one is surrounding the righteous one, for that reason justice goes forth crooked." -- Habakkuk 1:4, the Bible

At the end of a long and winding road in the search for justice, the antitrust case against Microsoft has finally come to a dead end. Although the corporation was convicted of a felony under the Sherman Antitrust Act, the courts have failed to fine or imprison the convicted felons who have monopolized a large part of the software trade both within the U.S. and with foreign nations. Since the Sherman Act quoted above requires such a punishment, the courts have failed to follow the law themselves.

It is easy to see from the paltry sums demanded by the Sherman Act that the law has not been updated to match today's financial situation. Adjusting for inflation since 1890 would produce a sum approximately 1000 times greater -- a punishment of $10 Billion, which would be appropriate for a global monopolist. Of course, Mr. Gates and Mr. Ballmer would each simply tell the judge, "I have it right here, your honor," and pull out a cashier's check for the punitive amount. An incensed judge would appropriately reply, "Good, and while you're at it, why don't you pull three years out of your other pocket!!" A solid three-year stint in a federal penitentiary (not picking up golf balls at Maxwell Air Force Base in Montgomery, AL, like the Watergate bunch did) might bring a dose of reality to the convicted felons who are now laughing and partying as they scheme to further monopolize the software industry.

Microsoft's excuse has always been that nobody has proved any damage to the consumer. However, this phony attempt to hide the truth only works on the uninformed. Let us compare the pricing trends in the software industry to the pricing trends of comparable, contemporary inventions:

1. Personal computer hardware: The PC hardware industry has produced equipment that runs 1000 times as fast in processing speed as PC's of 20 years ago, for a price approximately 1/10 as much cost. A $5,000 Compaq XT from 1985 ran at 8 MHz in 16-bit mode with an 8-bit bus. Today, a comparable desktop PC may run at 800 MHz in 32-bit mode, processing data approximately 1000 times faster but costing around $500 or so. However, the Microsoft software preloaded on that PC has 1000 times more defects and bugs than the MS software from 20 years ago, and costs anywhere from $50 to $250 today, compared to a wholesale cost of as little as $8 in the mid-1980's. While PC hardware vendors have provided increased reliability, increased speed, and added features (CD-ROM, modems, network cards) over the past 20 years, Microsoft's monopoly has produced lower reliability, slower software, while adding bloated and baffling features. But the key difference is that Microsoft's pricing as risen by a factor of 10, while the hardware cost has fallen by a factor of 10. Microsoft's monopoly has caused PC users to pay 100 times as much per copy of software as they would otherwise be paying -- about a dollar copy, the price of a freshly burned CD -- without the illegal monopoly to control the price of software.

2. Consumer entertainment equipment (VCR's): During the past 20 years, VCR's have changed from an expensive luxury to a cheap add-on. A $500 VCR of 20 years ago has become today's $69 bargain, with extra features as well. As a result, market penetration of VCR's is now approximately 85%, while PC's are found in less than 60% of U.S. homes. So over the same time period, 25% of potential PC users have been priced out of the market by the pricing structure dictated by Microsoft. Since preloaded software has risen in cost by a factor of 10, PC makers have been forced to keep their prices well above the $100 benchmark which would allow the next 25% of U.S. homes to own a new PC. A $100 PC should be as common as a $100 television set. That would only be possible without the need for expensive, power-hungry processors to keep up with the ever-slower software that Microsoft makes each year. It would also be possible if the preload cost of Microsoft products was at its correct, non-monopoly price of one dollar per copy instead of $100 per copy, which skews the entire price structure of the desktop PC industry.

So Microsoft products should realistically cost $1 per copy, matching the pricing trends of comparable contemporary industries. While Microsoft might yammer and complain that "we have added so many features, so the price should be higher," this reasoning is false and goes against the historical trend in parallel markets. Features go up, performance goes up, and price goes down -- UNLESS there is a monopoly that makes the price go up.

And one more thing that the Microsoft monopoly has done to harm the consumer. Due to the poor reliability of Microsoft products, PC users have experienced greater frustration, more wasted time, and increased susceptibility to software viruses and data loss than they would have experienced in an open, competitive environment with many low-priced, reliable alternatives. Consumers were denied the opportunity to experience these reliable alternatives because Microsoft's sole-source preload deals with PC makers punished these companies for preloading alternative software. As a result, nascent competitors were ruined, and related application developers were denied access to a potential customer base, causing their demise as well. Genius software developers went out of business, while mediocrity and sloppiness became the Microsoft standard for PC software. Software users experience lower quality -- something that is harder to prove in court, but just as real in its anti-consumer effects.

Most recent revision: October 28, 2002
Copyright © 2002, Tom Nadeau
All Rights Reserved.