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Breaking Windows

Dan Tortorice

Ever wonder what happened with the Microsoft trial? A year ago, Judge Penfield Jackson handed down a landmark ruling, ordering the company split in two. Though the ruling was extreme, it was not surprising. Jackson had made clear his contempt for the Microsoft Corporation, and even before the trial was over Microsoft had resigned itself to winning on appeal. The U.S. Court Of Appeals, after quickly staying Jackson’s order, finally heard oral arguments on February 26 and 27 of this year, and now we await a decision expected at the end of April or in early May.

What is the court likely to decide? The jurists seemed unconvinced that Microsoft had attempted to monopolize the browser market, even going so far as to question the existence of an independent browser market to monopolize. The judges blasted Jackson for his behavior during the original trial, though stopping short of accusing him of bias. Considering these signs, there is little chance the court will uphold Jackson’s ruling. While some say there’s a 50 percent chance that the case will be thrown out entirely, the more likely story is that it will be tossed back to a lower court, and a different judge. The end result will most likely be an intact Microsoft, but one with severe restrictions on its activities.

It is a good thing that the court will likely reject Jackson’s ruling, for the ruling is woefully misguided and does little to improve the well-being of consumers who purchase Microsoft software. The essence of Jackson’s government plan is twofold.

It would break the company up into an applications and an operating system company, Internet Explorer being licensed only to the applications company. Second, it would restrict the actions of Microsoft so it cannot prevent competitors from gaining market share. For example, Microsoft will no longer be able to threaten PC makers with the loss of their license to distribute Windows if they put other companies’ software on their PCs.

While this plan may raise the level of competitiveness within the software industry, only bureaucrats wearing blinders could think that it would make the operating system market competitive. Microsoft does not continue to possess its monopoly power because it intimidates PC makers. It maintains its monopoly power because of the necessity of software compatibility. Even if someone develops a better operating system than Windows, people won’t want to purchase it until people write programs to run on it, and people won’t want to write programs to run on it until people begin to purchase it. It is this trap, and not Microsoft’s piranha-like business practices, that maintains its monopoly.

So the government’s restrictions on Microsoft’s business practices will do little to end the monopoly in the operating system market. Maybe, by restricting Microsoft’s anti-competitive behavior, the plan will allow another company’s revolutionary operating system to be placed on PCs, and maybe people will decide that they would rather have this new operating system than Windows. So it is possible that Windows will not be the dominant operating system forever. However, because of the need for software compatibility, society will only adopt this operating system if most computers use it. But at that point society trades one monopoly for another. So instead of Bill Gates screwing consumers, we have someone else screwing us. The unfortunate fact is that this is the best outcome the government’s plan can offer us.

What is missing from the government plan? It’s an acceptance that the operating system market will always be monopolized by a standard software. This lack of acceptance is puzzling, because we should welcome it with open arms. What an inefficient society we would live in if programmers had to write for a multitude of different operating systems. The government should recognize this fact, and do what it has always done with natural monopolies: regulate the prices they charge.

Microsoft, like all monopolies, has gotten rich by charging exorbitant prices for its software, knowing that consumers have nowhere else to turn. It’s time for the United States government, the people we elect to serve our interests, to stop Microsoft’s gouging of the American consumer. When the controls of the market fail to check the power of business, it is the obligation of the government to provide that check. While price regulation requires much analysis to be done correctly, given the massive potential benefit to consumers, it is worth the effort.