April 28, 2000 CPT Statement on the Microsoft Case
Note: Reporters can use this a quote from
Director, CPT. I'll be in Indonesia and Thailand
from April 29 to May 9.
- Consumers are harmed by the Microsoft monopoly
and Microsoft anticompetitive practices. Prices
for Microsoft Windows and Microsoft applications
are too high, particularly when one considers the
"forced upgrade" issue, the quality is poor, particularly in
terms of stability, and there is too little choice.
- Structural remedies, such as breaking up the company,
will benefit consumers. One need only look at the
explosion of innovation in Internet based applications, where
there is no single firm setting standards, and where competition
is intense, for evidence that private monopolies are not
necessary for standard setting and interoperability.
- In the Halloween Document, MS indicated it saw the
Internet Engineering Task Force (IETF) in particular,
and the Internet in general, as a threat to Microsoft
control over relevant APIs. Microsoft is using its
monopoly power in the PC OS and PC Office suite markets
to undermine applications based upon open standards.
Bill Gates and Steve Balmar are both unwilling to admit that
Microsoft has done anything wrong.
Microsoft has a record of trying to wiggle out of contract
provisions, and of acting in bad faith, illustrated, for example,
by its dealing with Sun on Java and Real Networks.
- Microsoft did not live up to the spirit of the 1995 DOJ consent
degree. The argument that the Browser was not an application, but
part of the operating system, was a bad faith attempt to avoid the 1995 consent order
restrictions on bundling. (The MS Browser runs on Unix, Windows, Windows NT,
Windows 3.1, and an Apple Macintosh.) Also, Microsoft used its pricing discretion
in non OS markets to pressure OEMs not to offer non-MS OS pre-loads.
- Microsoft responded to the order by the Judge to publish a copy Windows
without its browser by providing a 1995 version that would not even
work with current hardware (due to lack of current driver support).
This action demonstrated contempt for the authority of the federal court.
- A "conduct only" remedy with Microsoft would require a lot of "adult
supervision" by the government, and would be a much more intrusive
and administratively burdensome approach than a structural remedy
that involved creating separate companies for different parts of
Microsoft's product lines.
- Microsoft is demonstrating it will spend a fortune to lobby the
federal government and the Congress on the antitrust issue. Conduct
rules will be constant targets for Microsoft's lobbying efforts.
This doesn't mean that conduct rules are not useful. But they
will be susceptible to being undermined by Microsoft lobbying efforts.
- A break up would change Microsoft's incentives. Competitors in
applications markets (word processors, browsers, mail readers,
spreadsheets, presentation graphics, etc) would have a better chance
if Microsoft's applications were spun off to a separate company.
- Recent changes in technology have not made the case against
Microsoft irrelevant. If anything, the case is more important today
than it was in 1997, precisely because Web based technologies have
become more important for a wide range of activities.
- Microsoft's monopolistic control over the Browser and
the Office applications gives it an opportunity to continue
its assault on open standards for Web based applications.
- In high technology markets, there are competitions between
similiar products, but also competition that is related to
different "layers" of products. The Browser provided a new
layer, which was a competitor with Windows (and MS Office) for
control over critical interoperability APIs.
- By spliting Windows from the Browser and MS Office,
there will be more competition in the Office applications
markets. And more competition in the applications market
can lead to more competition in the OS market. If MS Office
was to port to BeOS, for example, Windows would face
immediate client space competition, because BeOS is a much
superior OS on technical grounds, but suffers from the lack of
applications. If WordPerfect
or the Lotus Office Suite could actually compete against MS Office
after a spin off, they too could have sufficient "mind share" to
make a port to BeOS interesting.
- If the Browser is separated from MS Office too,
it would be more likely that
open standards would be embraced. MS Office is an important
authoring tool, and MS Explorer is an important client software.
There is much to gain from separating the two platforms,
including incentives for greater disclosure of APIs from both
platforms, and less reliance upon closed technologies.
- MS does not dominate the market for software to run
new digital devices. This is evidence that Microsoft is
not the only company on the planet that can write decent
software. The fact that Microsoft eliminates competitors
on the Windows PC desktop is not because of superior
technology, but because of Microsoft's anticompetitive actions
that relate to Windows.
- Microsoft's biggest problem is a failure to innovate.
Since 1995, Microsoft's main achievement in the desktop market has been
making copies of copies of Netscape and Eurodra and Real Audio.
No "exciting innovation" has ocurred on the Windows desktop for several years?
Microsoft not been been a business success outside of products that work
best on the Windows platform.