As the world awaits the European Commission's antitrust ruling, certain pundits see the makings of a future investigation as Microsoft moves to compete more forcefully in Internet search, a domain where Google currently dominates.
The fear, in short, is that Microsoft will integrate aspects of search functionality into Windows in such a way that it will foreclose opportunities to Google. No company stands a chance when faced with such integration, leading to the eventual demise of Google.
To put it simply, I don't agree. Google, as a company which accounts for 80 percent of all Internet searches and a billion dollars in estimated yearly revenue, is a company deserving of competition, and perfectly capable of standing on its own.
First, recognise that a contest with Google would be one between two dominant companies, only one of which has extensive experience in search technology. Second, Microsoft's track record shows that the company competes more on technical merit than distribution. Last, Microsoft should do more to defuse antitrust regulators' fears by making a strong and public commitment to openness in the manner in which search functionality will be integrated into their products.
Microsoft, the critical competitor
How many companies would go up against the dominant Sony game system, PlayStation 2? Sony is the gorilla in the game console space, and combined with the installed base of PlayStation games (all of which are compatible with PlayStation 2), Sony's position seems particularly entrenched. Even so, Microsoft spent billions of dollars entering and competing in that market, posing the most credible threat to PlayStation's dominance.
The same applies to other markets Microsoft entered, many of which are dominated by a single player. Microsoft competes with Palm in handheld operating systems, Symbian (Nokia moved to take controlling interest of Symbian on Monday) in operating systems for "smartphones", Oracle in databases, and America Online in Internet access. Though Corel's WordPerfect these days is considered an also-ran, WordPerfect was the dominant word processing product. When Microsoft came out with Internet Explorer 1.0, Netscape owned a whopping 90-95 percent share of the market for Web browsers.
In short, Microsoft is one of the few companies to pose competition in markets dominated by one company. Few bother to challenge Google in Internet search technology, in spite of last year's estimated billion-dollar revenue haul. Microsoft is "bothering", serving the same important roles its serves in other markets, which is sole competitor to a dominant player.
To Microsoft's critics: An honest accounting
The subtext to the claim that integration is the way Microsoft has beaten past competitors is that Microsoft only succeeds by leveraging its dominance of desktop operating systems. Microsoft has the ability to integrate its products into Windows, giving those products theoretical access to 90-95 percent of desktop consumers.
Though perhaps true in a limited sense over the long term, it applies little within the time frames at which computing evolves. The integration advantage theory presumes that everyone upgrades to the latest version of Windows shortly after Microsoft releases it. That is far from the truth if usage figures for Windows XP are any indication. Only 42 percent of Windows installations currently run Windows XP, an operating system that has been available for over two years. This means that features integrated into XP hardly gain a distribution that is far above what is possible for other companies.
Sun has managed to get the Java runtime onto HP, Dell, and Gateway computers, who in total account for a 55 percent share of the US market (although only 33 of the worldwide market, but I haven't looked into whether Sun has made agreements with non-American PC manufacturers). That's higher, in other words, than the share Windows XP has of the total Windows marketplace. Furthermore, such an avenue of distribution (paying OEMs to include your products) is unique to Windows, as Microsoft doesn't make the hardware upon which its software runs, while Apple and Sun do (in other words, Microsoft won't be getting .Net pre-installed on Solaris anytime soon).
Talkback
The one flaw in the argument about people choosing to download IE6 and MediaPlayer 9 over Netscape and RealPlayer is that when you go to windows update to look for critical security updates, you also have these updates thrust upon you - in fact they are even touted as being critical for security themselves (which no doubt they are), and that alone makes users far more likely to install them than the competing products.
Some of this "logic" is deeply flawed.
First of all saying that Windows XP is 42% of the installed user base, and then saying HP, Dell etc. have 55% of the market is not the same thing. 55% of yearly sales is much less than 42% of all existing boxes.
Secondly you presume users will make a concerted effort to change the default settings. I think you're wrong. If you watch most user's they don't how.
Of course, you assume that users care, or understand that Microsoft search is different from Google search.
A typical pro-Microsoft apologist article from the get go!
Fraud, Extortion, Blackmail, Sabotage, Antitrust
The article by Mr Carroll seeks to focus on a very narrow definition of competition. He claims that since Microsoft entered a market dominated by another company, that it was not directly engaged in antitrust behavior.
This of course, is only a very small portion of the picture. When Microsoft decided to go after Lotus 1-2-3 and WordPerfect, they didn't put their best product on the shelves and let people make a choice, they told the manufacturers that they could either purchase Windows and Office together for $150, or purchase Windows alone for full retail price of $125. Microsoft knew that OEMs would get some discount on 1-2-3 and WordPerfect, but the net effect at the retail level would be either a machine costing $400-$800 more than the "Bundleware" product, or a machine which would barely be profitable when sold at the same price. In economic terms, Microsoft held the throat of each OEM and told them, "if you promise to put our applications on every single machine you sell, we'll let you breathe". Of course, the OEM had very little time to make up their mind, since they were at risk of running out of "air". If a street hood made such a threat to the local grocer, it would be called extortion. Microsoft called it 'aggressive marketing'. Eventually, he Federal Trade commission and DOJ settled out of court. This was the decree which Microsoft violated when it dumped IE as an "operating system enhancement".
Fraud, Extortion, Blackmail, Sabotage, Antitrust - pt 2.
When Microsoft saw Sun Microsystems capturing the interest of the CES at the same show where Microsoft was unveiling Windows 3.1, Bill Gates got very upset. In fact, he got so upset, that he had his people listen to the Sun Presentations to see what people liked about the IPC and SLC workstations. The following night, Bill Gates gave his keynote speech and announced that he would be releasing Windows NT, "New Technology", which would be "A better UNIX than UNIX" (indirectly asserting that NT would be better than the Sun offering).
The only problem was that there were no designs, no prototypes, not even a formal set of design requirements at the time the announcement was made. In the U.S., the FTC prepared to charge Microsoft with Fraud, for it's announcement of Vaporware.
It took almost 8 years for Microsoft to release Windows 2000, which offered anywhere near the performance, reliablity, stability, and security offered by the SunOS 4.0 operating system over 8 years prior. Meanwhile Linux created features that Microsoft didn't offer in NT until years later. Even today, Linux still offers features that Microsoft hasn't even tried to implement, partly because they can't until certain patents expire. Microsoft didn't come out with a "Better UNIX than UNIX". That would be achieved by Linux, nearly 6 months BEFORE the release of NT.
Fraud, Extortion, Blackmail, Sabotage, Antitrust pt3
When Microsoft was developing OS/2 with IBM, several resources and intellectual property were misallocated to the Windows 3.1 and Windows NT project. IBM filed suit, and quickly found evidence of criminal embezzlement. Microsoft executives quickly offered to settle, offering to give IBM the source code to "32 bit OS/2" and also giving them the rights to a "Windows Compatibility" mode which would allow OS/2 users to run Windows applications.
When Microsoft delivered the code, it was so bad that it was too unstable to release. IBM didn't get a really stable product until Warp 4.0. But when Warp 4.0 came out, Microsoft demanded that IBM stop selling OS/2 or they would not be allowed to license ANY OS/2. When IBM refused this generous offer, Microsoft demanded an audit and threatened to announce IBM's piracy of $30 million in software. IBM didn't believe Microsoft would do this, and Microsoft promptly published the announcement, neglecting to mention that this supposed piracy was for customers who had purchased OS/2 WITHOUT the Windows 3.0 compatibility module.
IBM eventually signed a deal, but Microsoft only accepted their offer because the IBM logo was prominantly displayed on the unveiling logo and an investigater for the Federal Trade Commission was present, prepared to file charges for the fraudulent claim that IBM was on board, if Microsoft didn't have a contract.
next: Sabotage
Fraud, Extortion, Blackmail, Sabotage, Antitrust pt 4
When Microsoft released Windows 95, they knew that there were several other operating systems which could also be used on the same hardware, including the same hard drive. OS/2 Warp included a "boot manager" which would let users boot either Windows or OS/2. Linux had LILO, which would let users boot Linux, Windows, or OS/2, depending on the user's choice. Some OEMs were offering systems loaded with multiple operating systems, partly in hopes of getting a higher price.
Microsoft decided to "fix" these computers by having the Windows 95 installation program not only destroy the boot manager, but also reformat the hard drive as a single partition. This meant that users would lose all of the personal data stored on their hard drives, so that Microsoft could "purge" the system of competitior's software.
It was a very effective form of Sabotage. Users who installed Windows 95 would lose their original data, which made any plan for returning to Windows 3.1, or any other operating system, pointless. It only took a few weeks for the Linux community to work around this, but since the Windows 95 registry and dlls were so easily corrupted, desktop machines were frequently "reimaged" wiping out all of the user's personal data.
When IBM got Microsoft upset, they had just purchased the Cyrix processor company. Microsoft released Windows NT 4.0 service pack 2.0 which was shown, through court testimony to have been an act of deliberate sabotage. Microsoft initially argued that this was a violation of the "no Reengineering" clause of the EULA. The Judge ruled that in this case, such use of this clause amounted to obstruction of justice. Microsoft quickly settled, releasing Service pack 3.0 a few days later. There are numerous other examples of "fixes" which have proven hazardous to 3rd party applications which compete with Microsoft for market share, but this was the most dramatic of court cases.
Fraud, Extortion, Blackmail, Sabotage, & Antitrust pt 5
Microsoft's most effective defense against it's illegal tactics, especially antitrust related activities, is the aggressively negotiated settlement with the undetected loopholes.
When the DOJ settled over the fraud and bundling case in which Microsoft illegally captured the spreadsheet and word processor market using Office Bundleware, Microsoft reserved the right to add "operating system enhancements". Almost immediately, with the release of Windows 95, Microsoft put 98% of the code for Microsoft Office into the Windows DLL distribution. Microsoft also bundled the Mosaic browser and a great deal of BSD developed code into Windows. This had been done without the consent of the developers. Spyglass had been given permission to sell "branding rights", the ability to change logos and configure preset shortcuts, but not the ability to significantly modify code or add proprietary extensions.
The NCSA solved the problem by simply rewriting the NCSA license, claiming that it had the right to modify the license at will.
The fact that Mosaic development was led by Marc Andreeson, and Marc now headed Netscape, and Microsoft was driving Marc Andreeson's company out of business with his own software, didn't seem to bother Microsoft or the NCSA.
But the developers retaliated by releasing patches only under the GNU public license. This meant that if you applied the patch, the application automatically became Open Source. The NCSA server was so heavily patched that it became "A patchy Server". But the "madison avenue types" changed the spelling and Apache is now the top server of the Internet, completely displacing NCSA, and taking 70% of the market to Microsoft's 22%.
In the same settlement, Microsoft was no longer allowed to use "per cpu licensing". This meant that Microsoft could not require each OEM to install windows. Microsoft got around this little problem by using "cliff tiered" pricing. Essentially, it was cheaper to purchase far more licenses than you actually needed, than to purchase enough to ship a mix of Windows and Linux, UnixWare, or OS/l2 machines. Furthemore, the license terms required that if a machine was shipped with a hard drive, the drive had to be configured with Windows. The license terms of Windows not only forbade installation of other operating systems, but also prevented the installation of other applications, since the OEM was not allowed to alter any aspect of the boot sequence from the power-on to the first display of the desktop. This meant that any third party software had to be installed by the user.
Fraud, Extortion...Antitrust - Weasel clauses.
Microsoft's most effective strategy is to negotiate feircely with prosecutors or plaintiffs, and then slip in these last minute clauses that seem innocent and reasonable, but effectively nullify the spirit and intent of the agreement. This is often called a "weasel clause" referring to the way a weasel sucks the yolk out of an egg, leaving the shell intact so as to avoid the wrath of the mother bird.
In this latest settlement, there are numerous weasel clauses. The biggest one of course is the one that allows Microsoft to compensate OEMs for their support and development efforts for things such as hardware and drivers.
Microsoft is not allowed to tell the OEMs that they cannot offer products for Linux, but they ARE able to negotiate contracts with Independent Hardware Vendors (IHVs) which require them to withhold publication of drivers for Linux for a period of say, 3-6 months after the public release of their new product.
Microsoft can then tell the OEMs that if they use this restricted hardware, that they can receive a substantial discount. If the OEM refuses and the other OEMs accept, the cost difference is significant enough to mean that the refusing OEM either can't sell at the reduced price charged by the competitors, or can't make any profit on the machine he does sell due to the higher royalties for Microsoft products.
Microsoft also still controls placement of advertizing as part of it's control of the Windows branding and trademarks. The argument for this being that they don't want an OEM to be putting the Windows logo in Hustler or Gent. But in practice, the publications most likely to be excluded are those which publish pro-linux articles. A PC magazine that says "Don't wait for Longhorn, use Linux" can quickly find itself losing $200,000 in full-page ads because Microsoft doesn't like the placement. To Microsoft, pro-linux publications are far more "pornographic" than anything published by Larry Flynt.
The net effect, of course, is that in countries like the United States, who didn't establish effective settlements based on measurable results, such as quotas, market share targets, or other undeniable measures, Microsoft still manages to maintain it's Operating System Monopoly, and has extended it to include control of multimedia, PDAs, application software, banking and financial transactions, e-mail, web browsing, and digital certificates.
This of course gives Microsoft a great deal of information. Microsoft controls the flow of information that can be very effective at nullifying opponants, and promoting allies.
When Bill Clinton's DOJ had Microsoft executives admitting to criminal activities during cross-examination, Microsoft was able to capture information related to the the interrogation of Monica Lewinski, publish it to a BBS sponsored by MSNBC (which in unregulated), then use this posting as the basis for breaking the story by putting a link to the discussion on the home-page of MSNBC.com. They then discussed this link on MSNBC television, CNBC, and this lead to coverage by NBC commenting on the reports of it's "sister station".
Microsoft used similar leaks to impact congressional elections, and even the 2000 presidential elections. When George Bush publicly announced that "companies should have the right to innovate", it was a clear signal that Bush had struck his own deal with Microsoft. Microsoft did what they could to shift the election in his favor, especially in Florida, where replays of the Elian Gonzales raid mobilized many Cuban-American voters.
Fraud, Extortion, Blackmail, Sabotage, Antitrust
The article by Mr Carroll seeks to focus on a very narrow definition of competition. He claims that since Microsoft entered a market dominated by another company, that it was not directly engaged in antitrust behavior.
This of course, is only a very small portion of the picture. When Microsoft decided to go after Lotus 1-2-3 and WordPerfect, they didn't put their best product on the shelves and let people make a choice, they told the manufacturers that they could either purchase Windows and Office together for $150, or purchase Windows alone for full retail price of $125. Microsoft knew that OEMs would get some discount on 1-2-3 and WordPerfect, but the net effect at the retail level would be either a machine costing $400-$800 more than the "Bundleware" product, or a machine which would barely be profitable when sold at the same price. In economic terms, Microsoft held the throat of each OEM and told them, "if you promise to put our applications on every single machine you sell, we'll let you breathe". Of course, the OEM had very little time to make up their mind, since they were at risk of running out of "air". If a street hood made such a threat to the local grocer, it would be called extortion. Microsoft called it 'aggressive marketing'. Eventually, he Federal Trade commission and DOJ settled out of court. This was the decree which Microsoft violated when it dumped IE as an "operating system enhancement".
Competition is good but Microsoft is not going to compete by making a better search engine, it's going to compete by bundling its search engine and making it
1- the default search on MSN, already the default homepage on most Wintel computers sold worldwide
2- hijacking "server not found" errors with its own reply page and search engine field.
Consider that the majority of computers use MSN.com as their homepage because consumers do not have the knowledge or inclination to change it. At the same time, tertiary MSN.com services like the messageboards and stock charts receive significantly less traffic and generate less posts than do Yahoo!s or Raging Bull's. This illustrates that despite the apparent marketshare in page views, websurfers actually prefer to spend their time on the web elsewhere and to use other services. Microsoft is getting free hits that generate traffic and revenue solely out of consumer compliance.
Microsoft search isn't competition, it isn't a benefit to consumers and it serves no purpose other than to hurt Google.
To Anonymous.......................................................................................................
First, pick a random nonsense handle and let ZDNet show it. I hate responding to one of several anonymous posters.
> First of all saying that Windows XP is
> 42% of the installed user base, and
> then saying HP, Dell etc. have 55%
> of the market is not the same thing. 55%
> of yearly sales is much less than 42%
> of all existing boxes.
That is a good point, though its worth noting that it took Microsoft 2 years to reach that 42%. Still, every box with XP goes out with certain products, whereas only 55% go out with Java (though I think it's higher, as I only picked the 3 OEMs I knew off the top of my head). It's not a HUGE difference, though, at least not the difference that is argued by most people who make the claim that integration = access to 95% of the market. It doesn't, and the effect is GREATLY less than that.
If you happen to have any stats on the installed base of the Java VM on Windows computers, that would be greatly appreciated.
> Secondly you presume users will make
> a concerted effort to change the default
> settings. I think you're wrong. If you
> watch most user's they don't how.
...or don't care, which is a choice by itself (consumers have the right to spend their time doing other things than tend to their computer). Consumers get more proficient the more they use a computer, and MOST consumers these days have experience of downloading software. Therefore, I think it is too strong to say MOST don't know how. Those that don't know how wouldn't be downloading ANYTHING in the first place. For them, it is a HUGE advantage that Microsoft integrates products into WIndows, as if they didn't, they'd never use certain kinds of technology.
Think of integrated product as training wheels. If you learn to use a web browser, you know how to download, and if you know a browser, you know what you don't like about it. You're more likely to consider something else if you have experience of at least one example.
> Of course, you assume that users care,
> or understand that Microsoft search is
> different from Google search.
Well, someone caused 80% of all internet searches to get funneled through Google. It's a combination of regular consumers AND companies, who are also consumers.
and as for RealPlayer
I think it's the most consistently bad-mouthed product, typically by people who can't be bothered to give it a chance or are too dim to work out how to turn off the registering / taking-over-my-computer options.
WMP is good I admit but its ubiqitous nature is not doing anyone any good, it's bad enough having browser and O/S dominance.
Besides this, Real still comes out on top for streaming video at high compression (unless you read the impartial independent review, funded by, errr, Microsoft).
Not forgetting the BBC swears by Real.
To Rex: - a very interesting read. Is this posted anywhere else rather than read countless talkbacks?
Thanks Rex,
In order to understand the future you have to understand the past.
Google used to tell how many linux servers they used. Then they stopped to tell.
Some time ago New York Times (or some similar)
told that they where using more than 50.000 linux
machines for their searh.
If that is true, I just wonder if it was an intentional leak by Google to show competitors that "it is not that simple".
Something as good or better on Windows, Hmmm.
Thanks Rex,
In order to understand the future you have to understand the past.
Google used to tell how many linux servers they used. Then they stopped to tell.
Some time ago New York Times (or some similar)
told that they where using more than 50.000 linux
machines for their searh.
If that is true, I just wonder if it was an intentional leak by Google to show competitors that "it is not that simple".
Something as good or better on Windows, Hmmm.