Customers granted Microsoft its 90 percent market share
by Bruce Ramsey
September 16, 1998
©Copyright 1998,. Reprinted with permission.
James Barksdale, president of Netscape Communications, asked the rhetorical question in March at the Senate Judiciary Committee. How many spectators had computers? Hands went up. How many didn't have Windows? Hands went down.
"Gentlemen, that's a monopoly," Barksdale said.
Microsoft opponents packaged this testimony into a film, which was shown in Seattle last month at a conference on antitrust law. It was a tub-thumper, but Payton Smith, a partner at Davis Wright Tremaine, spotted its weakness. "I would have been more moved by that film if I hadn't seen so many competitors in it," he said.
Sen. Slade Gorton made the same point: that the complaints are from competitors, not customers. He called the case "a private lawsuit being pursued by the government of the United States."
The conference sponsors, the Competitive Enterprise Institute and the Washington Institute and the Washington Institute Foundation, are both inclined to favor Microsoft. But they had speakers from both sides on the central questions: Is Microsoft a monopoly? Is it bad? Should the government attack it?
Microsoft's critics focused on its conduct. Microsoft, they said, is muscling into cable TV, banking and television-even political magazines. "Consumers don't like the idea of a single firm controlling everything under the sun," said James Love, executive director of Ralph Nader's Consumer Project on Technology.
Microsoft's supporters responded that the company hasn't been able to control everything. That it has 90 percent shares in a few markets means not that its conduct is bad, but that its products are good. "Products that aren't any good fail," said Jonathan Zuck, director of the Association for Competitive Technology.
Even monopoly itself does not imply high prices, they argued. Stan Liebowitz, professor of managerial economics at the University of Texas, said the price of Microsoft Word fell even as its market share on the Macintosh rose to 100 percent. Microsoft had a monopoly, he said, "but it didn't act like a monopolist."
Both sides claimed the mantle of competition. The anti-Microsoft side had a genteel, supervised version of it, with a lot of little guys, none of them playing to win. The other side gloried in players who slugged it out.
The slug-it-outers sometimes shrank from stating their case plainly. I would begin such a case with an admission that Microsoft is a monopoly-as much as anyone is ever likely to get in an open market.
Microsoft's near-monopoly mainly reflects its CEO's skill in strategy, not tactics. Bill Gates was the first to see that we computer buyers are herd animals who yearn to own the same technology as those around us. And for a good reason: We remember what happened to our TRS-80s, Osbornes, Commodores and other Studebakers of silicon history.
Our rush to one technology is called a "network effect." Critics advance it as an argument against Microsoft: The technology that wins might not be the best. But that argument justifies what? A law against network effects? An Endangered Technologies Act?
Network effects reflect consumer choice. Microsoft has a 90 percent market share because we customers have granted it.
It is a rational choice. We get the widest choice in applications by accepting a standard operating system. And why not? The operating system means little to us. It is useless by itself. It is not so much of a product at all, said Yale University law professor George Priest, but a kind of language.
Some of Microsoft's critics sounded as if they wished that language would be public property. But it isn't. It was created by private investment and protected by copyright. The government is not going to buy it, and Priest said, "We can't think of how to break up the language of Windows in a way that makes sense."
Should government regulate it? The Justice Department has given us a sample of its brilliance in that department. Last Christmas, it was demanding the Windows 95 be offered in a disabled edition, with the Internet Explorer icon taken off, in order to promote consumer choice.
The alternative way of dealing with Microsoft's monopoly is to leave it to us. If Microsoft gets oppressive, we can all gang up on it and heave it out. We heaved out our vinyl OPS. We jettisoned Beta VCRs and eight-track tapes. We knocked off Nintendo as No. 1 in video games. Right now we can choose Apple's iMac, and tomorrow, perhaps something even better.
Whoever gives us a compelling reason to abandon Windows will make billions. Until then, the billions go to the owners of Windows.