The anti-capitalist jihad against Microsoft

By Gord Gekko
web posted November 1997

I can think of no other corporation, in recent memory, which has been the brunt of as many and varied attacks as software giant Microsoft Corp. and frankly I'm tired of it.

Don't get me wrong. As my co-workers would readily tell you, I can cuss as proficiently as any sailor when it comes to Microsoft's software. At work the majority of software that I use comes from Redmond, any of which can do something stupid that sets me off. At home I use much the same set-up, which as those same co-workers can tell you, has unleashed more than a few torrents of vitrolic speech at lunch aimed at William Gates III.

While Microsoft's software can irk me, what irks me more is the irrational campaign which Microsoft has been subjected to by its competitors, government, and busy bodies. Let's take a look at the number of actions, some perhaps deserved, that Microsoft has been subject to just in the last few years:

  • October 1997. Sun Microsystems sues Microsoft for $35-million for allegedly improperly implementing Java in Internet Explorer 4.0, contrary to the licencing agreement signed by the two competitors. A week later Microsoft sues Sun.
  • October 1997. U.S. Attorney General Janet Reno threatens Microsoft with a $1-million a day fine for allegedly pushing PC manufacturers into bundling Internet Explorer 3.0 with Windows 95. Compaq Computer, Micron Electronics, Inc. and Gateway testify that Microsoft threatened to withdraw permission to bundle Windows 95 with their computers unless IE3.0 is included.
  • September/October 1997. Justice Department looks into Microsoft infusing $150-million into competitor Apple Computer Inc. and the cross licencing agreemeent the two signed.
  • September 1997. The Ralph Nader led Consumer Project on Technology began an on-line petition that asks the Justice Department to protect consumers "by taking action to prevent Microsoft from taking anti-competitive practices to monopolize the market for Internet browsers." Nader states that by bundling IE for free with Windows 95, it makes it hard for Microsoft's competitor, Netscape, to actually sell its product. Nader essentially asks for the government to protect consumers by forcing a company to start charging for something that is free.
  • San Francisco group, NetAction, launches campaign to alert federal government, specifically Congress, of alleged antitrust moves by Microsoft.
  • Justice Department launches investigation into Intel. Unofficial alliance with Microsoft part of investigation.
  • Summer 1997. Report released to Justice Department accusing Microsoft of unfair competition.
  • Federal regulators begin looking into Microsoft's interest in video streaming technology companies like Progressive Networks (formed by a former Microsoft employee) and Vxtreme.
  • 1996. Justice Department investigates claims by Netscape Communications Corp. that Microsoft pressured PC makers into bundling IE with systems.
  • 1994. Microsoft settles anti-trust investigation into its practice of getting royalties for every PC whether or not it comes bundled with Microsoft software.

And to add to the list, this month the Senate says it will hold subcommittee hearings on anti-competitive practices in the computer industry. Bundling of Internet Explorer with Windows 95 is likely to be discussed.

Whether Microsoft is guilty of all of these "crimes" is a matter for America's learned justices to deal with. My contention is that most of these actions are simply anti-capitalist. Period.

Despite its reputation for hard-nosed business tactics, a majority of Americans admire Microsoft because those tactics made it what it is today...an American success story. Microsoft is responsible for three billionaires and the highest level of millionaires per 100 employees than perhaps any American company in history. It employs tens of thousands of people in a sexy industry and it pays big time taxes to the government. People generally don't like the idea of Attorney General Janet Reno breaking Microsoft on the wheel.

The question of monopoly

To deny Microsoft has a monopoly is to deny Bill Clinton has a "slight" character deficit. It's a fact which can be taken for granted. But the difference between Microsoft's monopoly and some other monopolies in America's recent past is striking. Microsoft's has come from the consumer.

No doubt you are thinking, "Well, where the hell else could it come from?" To that I simply say a government. Many of the monopolies formed this past century or more in the United States did not come from unfair market practices, collusion or illegal actions on the part of corporations, but from a government which claimed it would fight unfair monopolies, but regulated the economy so that it happened anyway or blatantly created them themselves.

Ever heard of those 'evil' railroad barons? Government created them. It was the United States government who gave all companies, whether solid or fly-by-night, land on which to build railroads for free. Many of these railroads were built shoddily just so the company could get their hand on the land. The action of the government 'liberted' the railways from competition with other forms of transportation and forced alternative means out of business. Were you taught in school about the successful wagon or riverboat businesses of the same era? Wonder why? Was Microsoft given this same advantage? No.

How about the telephone system? Before AT&T was broken up by the United States government, it had a monopoly largely granted and protected by the government. You think you pay plenty for long-distance now? Thanks the government consumers had the privledge of paying up to $5 a minute in the 1950s for a coast to coast call. About 35 per cent of the public owns PCs, with about 80 per cent of them running MS-DOS...what's the market penetration of telephones? Which one influences your life more? The telephone.

Ever wonder why a Japanese car is more expensive than a similar American car? Huge cost from shipping it from Japan? Riiigghhtt....nothing to do with those huge levies and tariffs your federal government imposes to protect inefficient American car makers right? You may as well include every protectionist action on that list! The software industry isn't under the same regulations.

And thank goodness Reno knows where her real priorities lie. Forget about the White House's campaign-finance irregularities, the security breaches, the foreign arms dealers, Oval Office telethons, and suppressed videotapes. What keeps Reno's batteries charged, we're happy to report, is her zealous commitment to truth, justice and an ideal Office Suite software package that would guarantee consumers a "better" enforced choice. Just imagine: WordPerfect, Lotus 1-2-3, CorelDraw - and absolutely no compatibility between these non-Microsoft applications. Ah, heaven. Free at last, free at last.
Michelle Malkin,
Seattle Times, Oct. 28, 1997

My point is that Microsoft had to earn their monopoly because until recently the government didn't take the same level of interest in software that they did with other industries.

In a sector of the economy where the government does not interfere or keeps its interference to a minimum, a business must gain a monopoly by meeting the demands of the consumer, and it can only keep that monopoly but continuing to meet those demands. Once that monopoly is gained, a business cannot rest on their laurels or competitors will rise up and offer new and innovative products. IBM learned that lesson the hard way.

That's what happened in the 1980s. Most people seem to forget that Apple Computer once had a commanding 50 per cent of market share in the desktop PC market with their Apple II system. Apple's mistake was to rest too long on the Apple II and allow IBM's PC to make inroads. Apple charged a premium for their hardware (both the Apple II and the Lisa/Macintosh) and consequently lost share to IBM and Microsoft.

The same thing is happening to Microsoft in the browser market. For all of Ms. Reno's prattling, Microsoft has, and by some reports continues, to lose in the browser market war. Even though Netscape charges for their browser and Microsoft does not, Netscape enjoys a 60 to 70 per cent marketshare. They enjoy a technological edge (though that may not be the case with Internet Explorer 3.02 or the new 4.0) and it has translated into continued success. It is competition from Microsoft that keeps Netscape innovating and improving their product, not Netscape.

In all markets that Microsoft has succeeded, whether with their applications or their operating system, it has always been the marketplace which has given them their commanding position. Alternatives exist to every Microsoft product be it operating system or application, and in a few cases better alternatives, yet consumers overwhelmingly vote with their money to purchase Microsoft products.

"It takes extraordinary skill to hold more than fifty per cent of a large industry's market in a free economy. It requires unusual productive ability, unfailing business judgment, unrelenting effort at the continuous improvement of one's product and technique. The rare company which is able to retain its share of the market year after year and decade after decade does so by means of productive efficiency -- and deserves praise, not condemnation."
- Alan Greenspan, Antitrust (1962)

What Microsoft's enemies fear is the company's supposed level of arbitrary power, free from the bounds of competition. It's opponents fear Microsoft's dominance will destroy them, and with it innovation, and leave the market with no alternatives.

Someone could, though, persuasively argue that it is precisely that dominance and concentration of power that has pushed the software industry forward. Microsoft's size has allowed millions of users a common entrance into information technology by the imposition of standards. Microsoft's standards they may be, but standards they are none-the-less.

It is the natural course in economies that small companies either grow into large ones by meeting demand, or by merging with others to augment profits and possibilities.

Perhaps Microsoft has done some wrong, but by whose judgment? The same government which helped to create some of the most bloated monopolies in American history? A government which insists on rigging the field so that one group has an unfair advantage...or an undeserved 'level' playing field?

The jihad approach to Microsoft for continuing to improve their products and gain market share is nothing but an attack on a successful business, perhaps one of the most successful this century.

When you think about it, Microsoft and its bretheren produce nothing tangible. Data encoded on disks or CD-ROMs is not quite the same thing as steel rolling out of Pennsylvania, lumber out of British Columbia, or oil from the Gulf of Mexico. Software is a product and tool of the mind, it is intellectualism in action, a faint trace translated into electrical impulses. And Microsoft has been the most successful at innovating and selling those faint traces.

Let's face it: Microsoft has never been more right in claiming that IE is integral to its OS. True, it might have passed for a separate application in ye olden days of 3.0, but forget about Win 98; IE 4 is already one great, big blendo. Worse yet, it's immediately clear that seamless Net integration is appropriate, intelligent, and exactly what you'd desire and demand from an OS circa 1997.
- Joey Anuff,
HotWired: NetSurf (October 27, 1997)

Computer Reseller's Joel Shore had an interesting take on this in his column of October 25, 1997. Rather than go after Microsoft for its successes, why not prosecute the failures of the computer world for their costs to the public?

Charge Lotus 1-2-3 for squandering their immense market share, says Shore. Rather than blame Microsoft Word for its dominent position, why not charge WordPerfect for porting its popular word processor to OS/2, Apple II GS and Next, but not Windows? Instead of blaming Microsoft Access, why not charge the makers of dBASE for their arrogance?

"The largely bonehead decisions that drove most of these companies to oblivion cost this country thousands of jobs and probably millions in tax write-offs," writes Shore.

"You tell me which is worse for America. It continues to strike me as quite odd that the American justice system deplores major successes and insists on breaking them into little pieces," says Shore.

Amen.




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