Monopolies are aberrations that perpetuate market inefficiency. Nobody benefits from a monopoly but the monopolist; everyone else is harmed by stifled competition. In an efficient market, when a company starts acting in opposition to its customers, those customers can patronize other vendors. This helps align the interests of buyers and sellers. But monopolists can ignore or even work against the interests of customers with little fear of losing them; they've got nowhere else to go.
A fundamental element of free markets is the customer's freedom to choose. In the case of Microsoft, customers are "free" to choose alternatives, but to do so, they must sacrifice the ability to communicate. Is it reasonable to expect customers to make that sacrifice? Not when you're talking about a technology whose primary purpose is to enable communication.
A Solution
Conservatives tend to be philosophically opposed to government intervention in markets. Perhaps this explains the lack of enthusiasm that the Bush Administration displayed for the Microsoft antitrust case. (Although it doesn't explain why the Bush Administration favored steel tariffs or farm subsidies.) But, if the argument for action were instead framed in terms of cutting government procurement expenditures, if a solution were found that weakened Microsoft's monopoly through the markets rather than direct government intervention, and if the solution applied to the industry as a whole and not Microsoft specifically, the Bush Administration might be much less likely to stand in the way.
The federal government has tremendous buying power, as do many state governments. This buying power can be harnessed to encourage open standards in markets driven by network economics. Specifically, Congress should pass--and the President sign--a law mandating that all commercial software applications purchased by the government use open protocols for file formats and data communication. State governments should consider adopting similar laws.
Of course, such laws would need to be written to prevent companies like Microsoft from pulling their usual "embrace and extend" tricks, which are merely intended to pollute open standards and give the monopolist control of them. A transitional period would also be required to allow vendors time to document their protocols and submit them to accepted industry standards bodies, which would assume responsibility for their future development.
This solution would loosen Microsoft's grip on crucial industry infrastructure. It would also bring greater competition to other segments of the software industry, because Microsoft now uses its monopoly in business applications to fortify its other monopolies. Microsoft's decision against providing a version of Office for the Linux operating system, for example, helps ensure that Linux isn't more widely adopted by businesses.
Meet the New Tax Man
Microsoft's artificially high licensing fees and unreasonably restrictive licensing terms are so legendary within the industry that their economic impact has become known as the Microsoft tax. (Did you know, for example, that the cost of almost every PC sold includes the cost of a Microsoft Windows license, even if the purchaser intends only to use a different operating system on the machine? Or that Microsoft is scheming to have universities force every student to pay for Microsoft software, regardless of whether they actually use it?)
Microsoft's monopoly gives it the power to collect fees far in excess of what a truly free market would bear. Microsoft is able to extract this additional money from customers--in some cases, unwilling and even unwitting customers--simply because it is not subject to genuine competition.
Because customers have little choice but to render unto Microsoft whatever it demands, the Microsoft tax, like any tax, effectively diverts capital from what would have been its natural, market-based flow through the economy. This diversion of capital represents a market inefficiency that, if corrected, would free up capital for other uses. With the economy in its current state, with businesses starved for capital that could get our economy growing again, would finding ways to repeal the Microsoft tax really be such a bad thing?
Copyright 2003, Evan Coyne Maloney
About The Author:
Evan Coyne Maloney is a political commentator and software developer living in New York City. Some of his writings can be found on the website Brain Terminal, at: http://brain-terminal.com
- "Repeal the Microsoft Tax, Part I"
- "Repeal the Microsoft Tax, Part II"
- "Repeal the Microsoft Tax, Part III"
