Rear Windows: The software market is changing faster than the Clinton Administration can regulate it

National Review, Dec 21, 1998 by Alan Reynolds

Such competition in online marketing is hot and getting hotter. The largest computer manufacturers will soon be using special keys or icons to direct customers to favored sites. Search engines already promote commercial sites with the subtlety of billboards in Times Square. So do websites themselves, with banners, pop-up windows, and recommended links.

To suggest that Microsoft could possibly have any sort of monopoly over this frenetic Internet marketing is preposterous. So is fretting about any "unfair" monopoly over browsers. If computer magazines ever announce that a new version of Netscape or some other browser is superior to Explorer, serious Internet users will defect from Explorer as quickly as they dropped Mosaic for Netscape.

A RED HERRING

Another intellectual prop for the Microsoft case is the "new" economic theory of "network externalities" and "lock-in." Computer users naturally gravitate toward a common operating system, for example, because it makes it easier to communicate with other computers, and to exchange files. Whatever relevance this concept may have for operating systems or word processors, it has nothing to do with browsers. Smith's capacity to make use of the Internet is not even slightly affected by the fact that Jones uses a different browser, because web developers take care to ensure that their pages work well with all significant browsers. Windows browsers are easy to use and equally easy to discard in favor of another. Network externalities are a red herring.

In short, the only economic concept that is actually related to the core complaint is not collusion, predation, or network externalities, but "tying" or "bundling." A tie-in sale means forcing customers to buy one thing if they want another. If you want an Apple operating system, you have to buy an Apple computer. If you want an Apple computer, you have to accept the Apple operating system. For Microsoft to market Windows and Internet Explorer together is not at all comparable. It is not a tie-in sale because it is not any kind of sale. Internet Explorer is free. You don't have to buy Windows 98 to get Internet Explorer. Just log on to microsoft.com and download it for your old version of Windows, or for Mac. Conversely, Netscape's browser works well with every system, including Windows 98.

The closest the Microsoft suit has come to any tangible example of tying is an accusation that Microsoft threatened not to make an Apple-compatible version of MS Office unless Apple adopted Internet Explorer (Apple users are, of course, free to switch). Whatever merit that accusation may have, it has nothing to do with bundling Internet Explorer with Windows. Apple computers do not use Windows.

HEADED TOWARD ZERO

How can Microsoft be said to be forcing us to buy Explorer for free? How does the easy availability of Explorer make it any harder than it was before to download Netscape Navigator? Trying to make some sense of all this, I searched the index of Robert Bork's opus, The Antitrust Paradox, and looked up "tying." Judge Bork (who is working for Netscape) cites only two experts on this key topic, the first of whom is M. L. Burstein, in a classic 1960 study. Meyer Burstein holds Chicago doctorates in law and economics, taught at a dozen universities, and authored a dozen books. He seemed like the perfect person to clear things up.