Some Thoughts on the Microsoft Euro-Monopoly Verdict

Commentary by Greg Lewis / WashingtonDispatch.com
March 30, 2004

The European Union last week fined Microsoft approximately US$ 613 million for taking advantage of what it described as a "near monopoly" in the area of desktop computer operating systems. Near monopoly, indeed. It is estimated that Microsoft Windows is installed on 95 percent of the desktop computers in the world. Nor is it the size of the fine that's likely to bother Microsoft. The company has cash reserves totaling more than US$ 50 billion on hand.

What is bothersome, however, is the nature of the charges. Before I go into detail, though, let me first say that I most definitely have no pro-Bill Gates bias. Microsoft develops miserable applications software, and none of the programmers who worked for me when one of my companies was doing a great deal of software development would touch any of Microsoft's programming languages unless you put a gun to their head, which I didn't. If I'm going to make a leap of faith, it certainly isn't going to involve trying to make myself believe that Gates' programming tools are significantly better than his spreadsheets and word processors.

That said, though, it's unbelievable to me that Microsoft can again be found in violation of anti-trust legislation. What gets overlooked in these verdicts is the history of how Microsoft came to its position of virtually total dominance in the industry. In fact IBM, which fought off its share of antitrust suits for more than three decades, virtually scoffed at the upstart PC technology in the early '80s, only reluctantly entering the PC hardware business and not making an aggressive effort to wrest the rights to Gates' DOS disk operating system — which Gates had with supreme savvy only licensed and not sold to IBM — away from him.

The other aspect of the computer business during the '80s that I think bears on the case is the fact that Apple had developed a very competitive product that ran on a Unix operating system. Now Unix was (and probably still is, for that matter) an infinitely more powerful and flexible operating system than either DOS or windows, and Apple's products, especially after the introduction of the MacIntosh in 1984, were in many ways superior to IBM's, the operating system and graphical user interface being the most obvious. But IBM opened up its architecture (i.e., they shared information about their proprietary technology) to anyone and everyone who wanted to develop hardware add-ons and software applications which would improve and expand the machines' capabilities. This also enabled other manufacturers to develop PCs which competed with the IBM PC and which ultimately led to Big Blue's becoming a relatively minor player in the PC market.

Apple never opened up its architecture, preferring to take a totally proprietary stance re: product development. As a result, by the late '80s, Apple was losing market share dramatically, and all the hot software and hardware developers were developing for the IBM. Apple's strategy had effectively shrunk its position in the marketplace to the point where there just wasn't much point for software houses to develop Mac applications.

At the same time, Unix was very widely used in mid-sized multiple-user systems. DOS, and subsequently the early versions of Windows, could not support access to data by multiple users. In the hotel industry, to take just one example, virtually all the reservations and property management computer systems were Unix-based, and it was widely agreed that Unix was infinitely more powerful than anything Gates had or could bring to market.

The problem was, every vendor had his own version of Unix, and they were not compatible. If you had a Hewlett-Packard Unix-based system, software developed using SUN's Unix would run on it. This was true among at least 7 major players during the late '80s and early '90s. The Unix community was unable to agree on a standard operating system, and so programming languages and other development tools had to be created separately for each manufacturer's Unix system.

Bottom line: It's not Bill Gates' fault that Unix vendors couldn't get together and agree on a standard operating system which could have competed with DOS and Windows. And it's not Bill Gates' fault that any developer looking for an opportunity would say, "Hmmm, let's see, I can develop seven different versions of Unix products and fragment my marketing efforts to try to gain a presence in seven different Unix sub-markets, or I can develop one version of my product that will run on a boatload of machines, every one of the managers of which reads PC World and PC Computing. Tough choice, but . . . "

So to me it's really an open-and-shut case. Sure, Gates has a monopoly. It's due in some part, though, to the fact that his competition kept stumbling around until he was able to step in and take over the market, albeit with a markedly inferior product. Another aspect of the situation is that the computer industry in America has benefitted immeasurably from the fact that Gates has this monopoly. The industry is incredibly vital and vibrant, even today. The U.S. is so far ahead of European countries, for instance, where in most cases governments exercise tight control over the computer industries, that they can't even see the wings on our heels. Has Gates engaged in shady tactics? Almost certainly. Has he used his incredible power to dominate the market? Of course. So?

Twenty years ago, IBM looked down its nose at the fledgling PC technology, certain that it posed no threat to its (IBM's) domination of the industry. It's very much within the realm of possibility that Bill Gates, in his arrogance, could do the same thing with respect to another new technology. Nobody knows what the technology might be, but it's coming, bet to it. And it seems to me incredibly short-sighted that some agenda-driven Euro-judge has so little imagination he can't consider that scenario but can only think of "punishing" Microsoft for being a successful business.