I was reading The Register as I do from time to time and was struck by the nature of comments concerning the European commissions battle to redress some balance to Microsoft’s illegal monopoly abuse with regards to internet browsers.
to give you some background: The EU convicted Microsoft of abusing it’s Operating Systems monopoly in order to gain a web browser monopoly.
The proposed solution from Microsoft was originally to not include any browser at all, effectively hobble the operating system in the EU in order to blackmail the EUC into a simple fine. It’s called playing hard ball. Unfortunately for Microsoft the EUC have decided to play hard ball back to them, deciding that that option wasn’t good enough.
Enter idea number two. To present all users of windows (XP, Vista and 7) who have Internet Explorer as their default browser, with a ballot screen. Effectively asking every user what internet browser they would like. The EUC are considering this idea, although Opera objects on grounds of I can’t quite tell.
OK back to the comments from the article above. There are a number of commentators who are of the opinion that it’s Microsoft’s business as to what to include and what not to include in their operating system, and that if we do not apply the same restrictions to the FreeDesktops like Ubuntu and Apple’s Mac OSX then it wouldn’t be fair.
Since the EU isn’t calling for a ballot screen in Ubuntu, the EUC must be trying to do something improper. Since it’s obviously not very good for a Free Market to have a commission simply making stuff up as it goes along in order to disadvantage one competitor in a market place.
This is a quote from the noted Economist Adam Smith:
The price of monopoly is upon every occasion the highest which can be got. – The Wealth of Nations, Book I, Chapter VII
The problem with Microsoft is that they are a monopoly. This is an economic term for a business who controls the market through being it’s only supplier. This means that the invisible hand of the free market is in chains, so long as there is only one to which all the control is focused.
What regulators attempt to do is redress some of the balances by supporting the competition (financial or regulatory) and/or creating anti competition laws which restrict some of the actions that a company can take in order to use their existing monopoly in order to gain a new one.
For instance, say there was only a single petrol/gas company who sold fuel. Now lets say that the company decided to get into the Hackney Carriage business (taxies). because of their monopoly status, regulators would be (or should be) keeping a keen eye on what they do in order to break into this market and what they do in order to restrict competition. If it’s seen that this petrol company is using it’s unfair advantage as a monopoly, the regulator has the power to step in and split the monopoly up into a taxi business and fuel business and making sure they stay separated in operation.
Let’s say a single company (Microsoft) manages to get a monopoly of the computer operating systems on desktop computers, through the bad handling of another monopoly owned by a different company (IBM). At first everything is going fantastic, but then they miss the boat on a new technology and a new industry called “The Internet” and they’re finding that lots of people are using web browsers such as Mosaic/Netscape to get content via the internet.
Now suppose this company invents it’s own browser, they bundle this browser into their operating system for which they have a monopoly and they do not charge for it. Suddenly all the browser software makers have to compete with a product which is not only free (undercutting their business economics) but is also delivered to every single desktop users who is forced to buy the one single operating system that is only allowed to be made available on desktop computers.
Using their economic strength and their distribution monopoly Microsoft have killed off effective competition on a number of desktop computer fields: Web Browsers, Media Players, Word Processors, Networking Services and even Spreadsheets have all fallen to Microsoft and the companies that developed those ideas and software industries have been swept into the dusts of time.
Web Browsers was a particular worry, since as soon as Internet Explorer had destroyed the market for Netscape. The very standards of the World Wide Web as set up by the W3C began to erode. Everyone doing web development felt it, you developed for IE because it was what everyone had, no one cared that it didn’t follow the standards and it didn’t take long for a great number of websites to be completely incompatible with any other web browser.
So, what have I learned about monopolies? Well firstly they are economically damaging, they serve only to remove fair prices from the market and to stagnate the development of ideas. They are the very opposite of a free market economy and should not be allowed to occur, either through regulation or support for competition.
But what about now? Apple and Free Software is giving Microsoft a run for it’s money isn’t it? Well lets see, Apple is a hardware company not a software company. They produce hardware with it’s own software, so are not really in the same market as Microsoft. In the enterprise there are some competitors, and the server market was never Microsoft’s completely. As for Free Software on the desktop computer, it’s not a business, it’s a commons system. It’s not a competitor because it would be like Goliath vs the moon, it doesn’t even make sense. One is a force of economic and collaborative community licensing and the other is an business (even if it is an economic monster), Microsoft’s failed attempts to battle Free Software development actually look very similar to that image of a giant trying to battle the moon in my mind.
I believe that the EUCs goal of regulating Microsoft is right and proper and that the commentators on those articles are simply misinformed about the nature of the beast. Economic freedom and fairness are all well and good so long as everyone is on an even playing field, but good government comes from knowing how to achieve that balance and not loose it to unfortunate history.
As a side note, I would love for the competition commission to award a great deal of money to Free Software development as a way of spuring on competition.
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