Dangerous monopoly or expanding innovator?
March 10, 1998
This week, Microsoft CEO Bill Gates will appear before the Senate Judiciary Committee to answer questions about the alleged unfair practices of his company.
The battle between the federal government and the computer software super giant may be the biggest antitrust battle since the government ordered the breakup of AT&T in 1982.
Some of Microsoft’s marketing decisions do border on the illegal. The merging of their Web browser program, Internet Explorer, with the operating system Windows 95 angered some computer manufacturers. They wanted to provide their customers with the competing Web browser, Netscape, but couldn’t because Microsoft would not sell Windows without Explorer.
When a federal judge recently ordered Microsoft to de-link those programs, the company responded by providing some of the protesting computer manufacturers with 2-year-old editions of Windows 95 that would crash if Explorer wasn’t linked with Windows.
Two years ago, Netscape had a very strong foothold in the Web browser market, but that market share is declining rapidly due in part to Microsoft’s practice of linking Internet Explorer with the extremely popular operating system. Gates says the reason for this change is higher customer satisfaction with the Microsoft product.
Gates responds to his critics by saying that if the government is allowed to intervene, the ability of Microsoft and the rest of the computer industry to innovate would be destroyed.
The computer industry does have special significance in American industry. There are no other businesses in history that have enjoyed such rapid growth, innovation and profit as the computer industry. To ignore that would allow the government to ruin the future of an increasingly vital part of America’s economy.
That special significance does not, however, make the computer giant exempt from antitrust regulations. The rapid innovation that Microsoft encourages and stimulates in its employees would not be harmed by government involvement in this case.
Gates is worth over $45 billion dollars, and his company is now the second highest valued company in the world, at over $200 billion. Microsoft clearly has a monopolistic hold on the operating system market and seems to be moving toward achieving the same type of goal in the Web browser market.
Gates’ supporters don’t see the problem. Microsoft is an American success story, they say, and though the company might arguably be a monopoly, it is a benevolent monopoly that benefits the computer industry and provides a new area of growth for the economy.
Unfortunately, even a benevolent monopoly is illegal. Allowing Microsoft to continue this trend would squash innovation, not by Microsoft but by smaller companies. The roots of the computer industry began with those small companies. Who knows, maybe the next great success story is out there. We might never get to see it, though, if Microsoft doesn’t change some of its ways.
The last time massive corporations had such massive shares was during the early days of this century. The names of Morgan, Carnegie and Rockefeller all garnered much more attention, because the public saw them as massive, dangerous magnates that could dominate society as well as industry.
The public really doesn’t see the same things in Gates. Despite the fact that Gates and his company have grown faster than any of those other famous businessmen and their conglomerates, people still see Gates as the guy they might have known as the audio-visual club president back in high school. He seems harmless enough. After all, he’s just a computer nerd, isn’t he?
Well, Gates is not just a computer nerd, and he’s far from being evil. He is primarily responsible for the creation of one of the biggest businesses in American history. That same company can take some credit for spearheading one of the best periods of sustained economic growth we have ever seen.
Microsoft also provides some of the best software to computer users around the world. I myself swear by Word and Excel. They also have started many initiatives to bring underprivileged children into the technological revolution.
There are times though, where Microsoft looks more like the raging beasts of Standard Oil and Carnegie Steel than the gentle giant it claims to be. It’s clear that the government should not inhibit Microsoft’s right to innovate. The government does have a right, however to make sure the success of Microsoft does not mow over the small businesses that provide the backbone of the industry and the customers who make the company successful.
Robert Zeis is a senior in finance from Des Moines.