Microsoft And Monopoly Essay Research Paper America

Microsoft And Monopoly Essay, Research Paper

America’s century-old antitrust law is increasingly irrelevant to our modern

global information technology market. This law is obsolete, in accordance to the

current Microsoft situation, because in the past there wasn’t technology as

there is now. Recently the government has been accusing Microsoft as being a

monopoly. "Techno-Optimists" claim that "efforts by government to

promote competition by restraining high-tech firms that acquire market power

will only stifle competition." Some analysts disagree. They concede that

dynamic technology makes it tough to sustain market power. Still, consumers will

want compatible equipment, which will lead them to buy whatever product other

consumers are using, even if the product is inferior. Hence, is Microsoft a

monopoly or not. The range of views extends from the optimists who think that

changing technology removes the need for antitrust, to "middle-of-the-roaders"

who think that antitrust has always been and still is an important weapon in the

government’s arsenal. Microsoft is not a monopoly. Our world of

telecommunications and information technology has brought about many changes in

many fields but new technology has neither extinguished nor revitalized the

reason for antitrust. There are monopolies that the government ought to control.

Those are the very monopolies that the government created itself. It is

government that creates monopoly power by erecting and maintaining barriers to

market entry. In the most recent dispute between Microsoft and the Department of

Justice (DOJ), Microsoft is accused of "tying-in" an Internet browser

into Windows. Microsoft’s "tie-in" of its browser (Internet Explorer)

with its operating system (Windows 95) is a tie-in that shows no greater threat

to competition than the packaging of tires with cars, cream with coffee, laces

with shoes, even left gloves with right gloves. In actuality, tying arrangements

is pro-competitive. Consumers will buy the product that is more appealing to

their needs. Seven years ago the Federal Trade Commission began its

investigation of Microsoft’s market power in the sale of operating systems for

personal computers. That investigation was later joined by the DOJ and pursued

vigorously by Anne Bingaman, then head of the Antitrust Division. The DOJ

uncovered one practice it deemed worthy of challenge. Microsoft licensed its

Windows software for multi-year periods on a "per processor" basis.

Which means that, Microsoft, to help prevent software piracy, insisted that

computer makers pay a royalty to Microsoft for each computer they shipped,

whether or not Windows was installed as the operating system. DOJ was not

persuaded by Microsoft’s argument that physical machines can more easily be

counted than intangible copies of computer software. Nor was DOJ convinced that

customers might actually favor long-term contracts to guard against

unpredictable price increases and other uncertainties. This arose the question;

did Microsoft exploit its dominant market position by "insisting" on

"unfair" licensing arrangements. Of course not. Consider that Windows

became the industry standard because PC-makers thought it was a

"superior" product. An assessment that surely took into account the

entire set of product features. Not only technical features but also ease of

use, quality, price, service, and contract terms. Just like any other product in

the competitive market. Consider that there were no barriers that would prevent

another competitor from driving Windows out as being the market leader. These

are simple conditions that exist in an economic market. Those considerations,

apparently, did not impress the DOJ’s Antitrust Division. After a five-year

investigation costing millions of dollars, the Antitrust Division found little

that could be characterized as anti-competitive. But that did not stop the

government. Not only did DOJ file an antitrust suit that caused Microsoft to

cancel its planned release of Intuit (a manufacturer of a popular personal

finance program) it also threatened to halt the release of Windows 95

(Microsoft’s upgraded operating system). The head of the Antitrust Division,

Bingaman, was reportedly concerned about the link between Windows 95 and the

Microsoft Network (MSN), an Internet service provider intended to compete

against America Online (AOL). Whenever a user started a Windows 95 system, an

MSN icon appeared. Then one click of the mouse connected the user with the MSN

service. That packaging, according to DOJ, gave MSN an unsporting edge over its

online rivals. But a few more mouse clicks enabled any Windows 95 user to bring

up an AOL icon, which would appear automatically thereafter, at the same time as

the MSN icon. Satisfied w

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