Microsoft, is the European Commission misdirected?
The European Commission is attempting to mount an antitrust/competition case against Microsoft Corp. The European Commission's "case" refers to soundings which have spread over some four years and which assert that Microsoft is being anti-competitive. A similarly concocted case in the USA fell apart because of the inability of the judiciary to understand salient aspects of technological evolution. Indeed, since the initiation of this Commission initiative there have been significant advances in technological evolution. Mario Monti, the European Commissioner for Competition, in a somewhat Don Quixotic style seems to be chasing a similar moving target. The very wording of the Commission statements on Microsoft's ills parallel the naive statements in the US cases.
It has not gone unnoticed that the main groups who seem to be in line to benefit from any damage inflicted upon Microsoft are almost exclusively American companies, all of which failed to achieve their objectives in the USA. It is paradoxical that these American companies see in Mario Monti, a European Commissioner, a champion for their cause.
Microsoft is moving towards increasingly integrated systems so as to simplify and yet make more comprehensive their offerings to their customers. Bill Gates has explained this on several occasions it is the sort of thing his competition in the USA does not like, largely because several are one product houses. There is no technological logic to unbundled the MS Internet Explorer (MSIE) from the Windows operating systems. Although Netscape was the shrillest champion of this cause in the American case they tripped over themselves by permitting the quality of their own product to decline drastically. During the course of the case, the issue, as far as potential users were concerned, was no longer that Miscrosoft was crowding them out, but rather that fewer and fewer people wanted to use Netscape product, even if it was given away. There is a broad consensus that the last chunky and slow versions were no longer serious competitors to MSIE anyway. This specific issue has nothing to do with commercial practice but simply that a company which once had the best browser in the world had not innovated rapidly enough to keep up with the competition and lost out.
In broad terms the market now accepts that the best browser is MSIE. Although Opera, the Norwegian company is building up a reasonable trade it has a long way to go in the PC market. Opera is at least proof that it is possible to compete with Micosoft's free product by actually selling browsers. But many within the industry are curious about the imminent launch of the next generation browsers, virtual clients, by Navatec, the British company. The approach cuts across the logic of most people in the game because Navatec's Navetc-voyager runs exclusively under Microsoft's operating systems and provides services to users using any operating system.
The latest ruse is the "complaint" that Microsoft should not bundle its media player with its operating systems. Staff at the high tech Systems Engineering Economics Lab in Portsmouth, United Kingdom, see this as a repeat of the browser saga. They say that if the Commission would take the time to analyse the market it would realize that there are some very good competitors in this field who paradoxically are absent from the lobbies ganging up on Microsoft. The main beneficiaries of the European Commission's efforts to enforce debundling, if successful, would be one product American companies.
Jonathan Zuck, the President of the Association for Competitive Technology, the Washington-based IT grouping, mentions that Winamp and Quicktime, other media players, are competing very well and increasing sales. Jonathan Zuch emphasises that the MicroSoft products in many lines are the best and their media technology has recently won awards, this is why people are using it.
The broad consensus of staff at SEEL is that the position of the European Commission is hardly tenable. They point out that the European Commission was a champion of the benefits which flow from the merging of information technologies. The Commission has always tried to sell the advantages of merging data processing and telecommunications on the one hand and of the various media on the other. The Commission has pushed this concept to justify everything from EU funding of research and development, to the establishment of working groups and introduction of telecommunications regulations. There are mountains of documents produced by the European Commission, since the very early 1980s, stating plainly the benefits of merging multimedia, IT and telecommunications. The Commission actively encouraged and funded merging and integration and there was never any talk about the counter-intuitive move of atomization or unbundling integrated products. Whereas most European IT companies failed to come up to the Commission's desires for integration, one of the only companies to come close to this development model and have succeeded in delivering it to the market, is Microsoft.
Now, given the time scales involved, almost out of the blue, the current incumbents at Competition at the European Commission are suggesting that such technological merging is unacceptable. They are quite arbitrarily selecting items out of a hat, which should be demerged, that is, unbundled. This reflects a complete inconsistency and is, for those who were associated with such technological development, absurd.
The strongest case against Competition at the European Commission can be found in the documents written by the European Commission services which justified the ESPRIT programme, subsequent initiatives, the whole of telecommunications regulations including mobiles and the current Information Society programmes and projects. Specifically these were written under the old IT&TTF, Directorate General 13, and now Information Society and to some extent R&D. The Commission on this issue is in disarray. There is no consistency between information and telecommunications technology policy, information societal approaches in the application of IT and what is passing for competition policy. At this late stage, given that Competition has committed itself to such an arbitrary position, it would be impossible to regain this consistency. This reflects badly upon the Commission which is supposed to be a collegiate body. To save Europe a lot of embarassment, Monti would be better advised to stop meddling and unilaterally shelve this case. On the other hand, if Microsoft is applying unfair commercial practices, then this is another issue, and it should be pursued with vigour.
This seems to be a matter of a combination of a lack of understanding of the issues at hand, too much willingness to listen to quirky lobbies and a level of over-reach which raises serious concerns. By rushing to brand a fundamental technological issue as a competition issue the Commission position seems to be misdirected and potentially destructive. This sort of meddling is in no one's interests, least of all the people of Europe.
The other aspect of the Commission "case" is that soundings of un-named companies have raised a complaint about the lack of "interoperability" lack of openness of Windows operating systems and especially with respect to servers, so as to provide other developers with some hooks and code to develop systems which run within or with Windows operating systems and servers. Once again, time and technology trends are seriously against the Commission's position. The open system Unix is making a steady advance into the Miscosoft server markets. On the open code side there are two serious issues. One is that open systems are very easily abused by those with malicious intent because the systems are like an open book, no secrets, no advantages no protection. The other issue is the right of the developers of any software to protect their designs through intellectual property rights. You can't push these boundaries too far without having one legal vector destroy the another, and end up completely undermining the confidence to innovate on the part of market leaders. Again, this is a case of inconsistency on the part of the Commission.
Also on the question of interoperability, Jonathan Zuch is reported to have pointed to the fact that MicroSoft servers are fully interoperable with a range of products from other market leaders such as Apple, Dell, HP and IBM.
Navatec, a British company is developing highly innovative systems using techniques which were originally developed by Sun and Netscape, but whose innovative capacity seems to have dried up. Navatec is building a wide range of online services and systems which combine Windows operating systems and servers with their own servers, JavaScript and a range of technologies developed in Europe as well as other proprietary software and hardware devices. At Navatec, Miscosoft Windows and server interoperability has never been regarded as a constraint on innovation.
To have any case at all, the European Commission has to apply its judgement of competition effects within a defined market. However the Commission has not in fact defined the market it is addressing. According to staff at SEEL, the Commission seems to regard its actions in terms of the primary market of consumer choice and a secondary one of innovation. But the Commission has ignored the far bigger associated "operations market". This consists of an operational park of established systems used by individuals, organizations, governments and companies worldwide who rely on Miscrosoft products and services either directly and indirectly. This Euro multi-billion operational capital is worth at least ten times more than the primary markets that Microsoft sells in to. By changing the vulnerability of Micosoft systems through inappropriate levels of openness based upon ill-defined "interoperability" there could be significant liabilities and costs incurred on the part of those in this massive "operations market". This effect would not be just a local European issue it would have a worldwide impact. If the Commission make a mistake which harms people in the "operations market" then the Commission could be liable to compensation at a level it would not be able to afford.
Jonathan Zuck has raised another aspect of the Commission's market definition. The Commission, according to Zuck is using a too narrow definition of the market within which market shares can shift by over 50% within 18 months. The Commission case has been bogged down for 4 years and again the Commission is not up to speed on the animal it is dealing with, evolving technology.
It is notable that some of the most enthusiastic supporters of the Commission's dubious efforts are companies who seem to have lost their innovative edge and are failing to develop products which people want to buy and therefore are falling behind in the competitive race. Zuch is reported to consider that Sun Microsystems, a leading advocate of the, get-MicroSoft group, needs to undertake some development to produce something people want.
