- The Washington Times - Wednesday, June 22, 2005

High-tech is long past the heady days of the dot.com boom, and the industry is now also shrugging off the economic doldrums that followed the dot.com bust. Venture capital is returning, semiconductor sales are up, and the technology sector led a broad advance in equity funds last month. In a word, tech is back.

But much of the excitement has come from some unlikely sources. Google leads the charge. This leading search engine is so successful that it has become a verb: “Google it.” With Google so visible, it’s easy to forget that the company was only founded in 1998. It has blown past Yahoo! and leads MSN Search. Simply put, an upstart is giving the technology stalwarts of the 1990s a run for their money.

And for months, the tech media has been abuzz about Firefox, the Web browser challenging Microsoft’s Internet Explorer. The Mozilla Foundation, which distributes Firefox, recently announced that the browser had surpassed 50 million downloads — a fairly significant milestone indeed.

The success of Firefox has challenged the conventional wisdom that the browser wars were over and that the marketplace had settled on a dominant player — Internet Explorer. As CNET News pointed out, “With its first full-fledged release last November, Firefox has shaken up a Web browser market that most analysts had deemed almost wholly mature. For the first time in years, the market share of Microsoft’s Internet Explorer has begun inching downwards as Firefox adoption rises.”

Analysts weren’t alone in their failure to see opportunity in this market. Government regulators and some antitrust experts had long ago argued that Microsoft’s ability to distribute IE with its dominant Windows product made it impossible for anyone else to gain traction in this market. On the heels of Firefox, Netscape has launched a new browser that combines some of the best features of Firefox and IE. Apple has invested heavily in itsSafari browser, Norway-based Opera offers another option andrumors havecirculatedthat Google might launch its own browser, too.

Theories about market domination and stagnation in the technology industry have simply proven wrong. Consumers are motivated to look for increasingly better, more affordable or simply novel technologies. Fifty million Firefox downloads and 80 million unique monthly Google users demonstrate that there are vast opportunities for technology companiestoentersupposedly locked-down markets. Computer users have shown themselves to be quite adept at gaining access to products not bundled with their machines, and competition is benefiting.

Dynamic and competitive markets are moving faster than analysts and regulators can predict. In spite of the speed in which technology advances, government has continued to operate under the assumption that it can and should guide competition. Antitrust regulators spent more than a year trying to block Oracle’s acquisition of PeopleSoft, despite the fact that the database and enterprise application markets are extremely competitive. While regulartors’ effortsultimately failed, valuableresourcesand time were lost because of the beliefthat government should intervenein healthy marketplaces just in case competitionsours. Microsoft was nearly broken up a few years ago in one of the most striking examples of attempted government regulation in the high-tech marketplace.

These assumptions have hurt other industries as well. Antitrust regulators, for example, blocked Unitedand U.S. Airways from merging because the combined company might dominate the skies. Instead, both companies have gone into bankruptcy.

Thegood news is that somemembers of Congress have recognized that 19th-century antitrust laws and enforcement need modifications for the 21st-century information age. As a result, Congress createdthe AntitrustModernization Commission, which is now examining the role of antitrust in helping consumers, with the understanding that antitrust regulation should not trump free and fair competition.

Unfortunately, across the Atlantic Ocean, European officials have often pursued even greater regulation of competitive markets under the antitrust banner. The European Union blocked the Sprint-MCI and General Motors-Honeywell mergers. Despite enormous competition in the market for media-playing software, the EU also has required Microsoft to distribute a version of Windows without its Media Player.

Rather than helping consumers and competition, these decisions drive up costs for businesses, which hurt investors and hamper the drive to innovate. Antitrust laws need to be respected and enforced, and they can benefit consumers and competition when appliedjudiciously.However, regulation aimed at responding to what could be ephemeral market conditions can do moreharm than good.

Alltoo often, government takes a static view of markets — an unrealistic view,especially for the technology sector. The reality is that the technology marketplace is healthy, and it changes quickly. Government needs to think very carefully before imposing far-reaching regulations to address so-called marketdominancewhenthat dominance will soon be made moot by innovation and a changing marketplace.

It is a lesson that Brussels and Washington should take to heart.

Jim Prendergast is executive director of Americans for Technology Leadership.

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