Comment: Myths of the antitrust case

The richest man in the world still doesn't get it if he believes his anti-trust case is about 'whether a successful American company can continue to improve its products for the benefit of consumers'.

The richest man in the world still doesn’t get it.

Not even after the US District Court issued its findings of fact on the Microsoft antitrust case on Friday.

"At the heart of this case is whether a successful American company can continue to improve its products for the benefit of consumers,” Bill Gates wrote in an open letter.

But that’s a Microsoft myth.

The antitrust case is not about product development. It’s about product marketing, and whether a firm that dominates one key market can exploit that advantage so unfairly that consumers suffer.

Microsoft’s technical skills in developing innovative and robust software do not strike fear into the hearts of anyone except its customers. To take some recent examples, think of how often Windows 98 machines crash, or the weekly crop of security problems with Internet Explorer, or the clumsiness of the Windows CE palmtops. And there’s a very long list of Microsoft "innovations” that appeared first in packages from other vendors.

But Microsoft has shown true genius in leveraging sales where it has dominant market share—first DOS, then Windows, then Microsoft Office. Up until the time of the antitrust suit, major PC vendors almost never dared to sell PCs without Windows, because their overall Microsoft contracts might suffer. And software firms that needed Microsoft’s technical assistance sometimes complained that Microsoft picked up their businesses plans in the process.

Right now, of course, if you want to buy a PC it almost certainly comes with Windows, and Microsoft Office totally rules desktop applications.

Windows Doesn’t Matter Anymore?

Of course, the Internet will change everything. Or will it?

As the Internet explodes, PCs no longer rule the information highway. You’ll pluck the Web from your palmtop, or your digital phone, or a webified TV, or an Internet appliance so cute it lives in your kitchen. The big action in software development will be the Internet servers quietly spreading out this global smorgasbord.

And Microsoft doesn’t dominate any of those markets.

So (and here’s myth number two) the antitrust case is irrelevant, because we’ve now got a level playing field.

But in fact, this field of dreams has not yet arrived.

Windows PCs utterly dominate Internet access; the Macintosh is the only rival that climbs above the noise level, and not by much.

Microsoft is a major player in every new category of Internet access device, and it’s readying a no-holds-barred launch on servers with the upcoming Windows 2000.

Its overall strategic position has done nothing but improve since the antitrust case was launched.

Churning out huge piles of cash (over $2 billion profit in the latest quarter), it’s scooping up much of the information industry. So far this year it has bought into 36 companies, with 11 of those outright acquisitions. A Microsoft representative now sits on the board of many of the company’s natural rivals.

To borrow an image from George Orwell’s Animal Farm, while all the animals may think they are equal on the Internet, this animal is more equal than most.

And consumers should be glad that the courts will watch to see that Microsoft plays fairly in any barnyard brawls.

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