Tuesday, November 27, 2001

The federal government’s antitrust case against Microsoft apparently will end in a settlement. All that remains is for the presiding judge to give her blessing and for some recalcitrant state attorneys general to get on board.

It’s understandable why Microsoft would acquiesce.

The long case has been costly. Money that could have gone to producing great computer software has instead been sucked into the voracious legal system.

That hurts us all. In a world of unlimited resources, Microsoft might have stood tough until justice prevailed. But we live in a world of scarcity, something that Microsoft’s computer programs help us all to contend with more efficiently. Only the government has a nearly bottomless pit of money thanks to the coerced taxpayers.

Under the settlement, Microsoft no longer would be free to negotiate any mutually agreeable terms with computer makers for the use of its own property. Government presumes to know better how to run this part of the economy. While the government says consumers will benefit, the case was really for the benefit of politically connected companies whose products are not as popular with consumers. Significantly, Microsoft won’t have to unbundle its Web browser from its operating system. That’s a major win for the company, since the bundling was the major “offense” in the first place.

The settlement hinges on the theory that Microsoft is a monopoly.

And there’s one problem with that theory. It’s false.

Microsoft is no monopoly. The Postal Service is a monopoly. Some local telephone and electric companies are monopolies. The cable company is a monopoly. Competing with them is against the law.

But there is no law against competing with Microsoft. Just because an overwhelming number of computer users find its operating system useful does not make Microsoft a monopoly. There are alternatives. There’s Linux for Intel computers, and there’re Apple’s many models of the Macintosh. You don’t have to use Windows.

Yes, but unless you use Windows, it is said, you will not have access to the immense library of software programs on the market. Keep that in mind whenever someone says Microsoft has stifled competition. For while it is true that Microsoft’s quality, imagination and marketing genius make it difficult for anyone to succeed with a rival product, those same qualities provide entrepreneurs with a ready-made mass market for their wares. The huge base of Windows users enables other software and hardware manufacturers to be viable. A market full of rival operating systems, each with a small user base, might deprive all but the largest companies of the chance to prosper. Many “little guys” have gotten rich riding Bill Gates’ coattails.

There’s another part of this story that most people miss. As Robert Levy of the Cato Institute reminds us, Microsoft faces a formidable competitor every day in its own backyard. Who? Itself.

Microsoft has never been a company to rest on its laurels. It is always working to improve its products and here is the key sell the upgraded versions to its legions of current customers. Users of Windows 3.1 did not have to buy Windows 95, then Windows 98, then Windows 2000 or ME, and now XP. No matter which rung of the Windows ladder you are on, you are free to remain there. Your computer will do tomorrow what it does today. The user base is so large that it will not be ignored.

But Microsoft prefers that you climb the ladder and buy the latest products. To get you to do that it has to give you good reasons to switch from its old versions. Thus Microsoft’s new products necessarily compete with its previous line of products. The company can take nothing for granted. If the new Windows is too expensive or buggy, people will stick with the tried and true. Who’s hurt by that? Microsoft and Mr. Gates. Some monopolist.

As though this were not enough to scuttle the monopoly theory, Microsoft has to compete against the scariest rivals of all: the invisible potential innovators who with no warning will introduce new products in the future. Any one of them could right now be developing the product that makes Windows look like a Tin Lizzie.

Only government has the power to stifle competition. All Bill Gates can do is try to be better than everyone else. As a consumer, I’m rather pleased with that situation.

Sheldon Richman is senior fellow at the Future of Freedom Foundation in Fairfax.

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