Break Up Microsoft's Monopoly

1997 was the year of great falls in the computer and high-tech industry.

Home PCs began to break the $1,000 barrier in large numbers. The ego of Gary Kasparov (and the self-confidence of humanity) plummeted at the hands of IBM's chess monster Big Blue.

But many in the industry would like to use 1998 to bring the fall of the industry's version of the 900-pound gorilla: Harvard dropout Bill Gates and the Microsoft Corporation.

In 1997, the Justice Department made headway in its long-delayed antitrust investigation into the Redmond, Wash. company, accusing Microsoft of using Internet Explorer to destroy Netscape Corp. and win a monopoly in the Internet browser market.

Netscape built a fortune, at least in market value, by taking the roughedged Mosaic Web browser designed by the University of Illinois and crafting the Navigator browser. By 1995, almost everyone on the Web had a Netscape product on their computer.

Long-time Microsoft rivals saw the rise of the Internet and the browser as the perfect opportunity to defeat Gates's empire of Windows.

Whether or not their model makes sense--and to many in the industry, it seems quite a fantasy--the threat of personal obsolescence lit a fire under Gates and Microsoft. In 1995, Microsoft began to reshape all its product lines toward the Internet, making Netscape its prime target.

Netscape had a huge lead in product development; Microsoft would have been hard-pressed to sell copies of an inferior product while Netscape led the market. But this was Microsoft's ace in the hole: it didn't have to sell its browser.

Given the company's huge profitable market share in so many areas, Microsoft could afford to give a Netscape-killer away.

Netscape wasn't having much luck, any by the end of 1997 its market share was almost equal to Microsoft's Internet Explorer. Microsoft was quickly gaining momentum-and attention from Justice.

Gates says the government is violating the spirit of innovation by questioning its business practices. He says that a 1990s operating system must, by definition, include a Web browser to be a viable product.

Perhaps it would be convenient to have a Web browser built into Windows. But remember that two decades ago, it was convenient to get local and long-distance phone service from one vendor--Ma Bellsystem. This meant absurdly high prices too since the phone company had no competition.

Looking at Microsoft's history, there is reason to be concerned about its business strategy. Gates went on record in the late 1980s saying Microsoft should control every aspect of the software industry.

Gates and company follow an "embrace-and-extend' strategy: incorporate the features of competitors' products into your operating system and core applications, essentially giving them away, then make them slightly better to keep customers from buying the stand-alone version.

In market after market, Microsoft has followed this strategy successfully. Text editors. Drive compression. Screen savers. Disk tool software. 3-D graphics acceleration. And soon, speech and handwriting recognition. If Microsoft wins against Justice, add Internet browsers to the list of conquests.

Microsoft's reach into many software markets gives it other advantages that work against a competitive market. For years, Microsoft Word had a huge advantage over had a huge advantage over WordPerfect and AmiPro: when a new version of Windows came out, Microsoft's Office suite was the first version to work perfectly with it. Somehow, Microsoft's own application developers usually got their hands on new versions of Windows before their competitors did. Go figure.

The problem is that when Microsoft is done driving its competitors out of business, innovation tends to stop and prices usually rise. Recent hikes in the price of Office and a surprise end to the company's concurrent licensing policy show what Microsoft will do when it gains hegemony over a market.

Competitiveness is part of the American way; monopolies aren't.

It's time for Justice to do the right thing and break Microsoft up into smaller companies that have no choice but play fair.

--Kevin S. Davis '98, a Crimson editor, is an independent computer consultant and student director of HASCS's Advanced Support Team.