Antitrust's Greatest Hits

Reason, Nov, 2001 by David B. Kopel, Joseph Bast

Even if Microsoft achieves a high share in the server operating system market, it is likely to have little market power, because barriers to entry are low. Server software, including the operating system, carries out a limited range of functions. The software provides only the simplest user interface, which is the source of much of the complexity in full operating systems.

And what if Microsoft were the only browser company in the world? Could it then introduce a browser with Microsoft-only features and force the rest of the world to buy Microsoft server software, by making IE incompatible with every other company's Web server? An allegation to this effect was made in the spring of 2000 by thc Department of Justice, although the court never heard evidence on the subject. According to the allegation, Internet Explorer included proprietary extensions of Kereboros (a security program that prevents hackers from entering a Web site) that work best with the Microsoft Web server.

The first practical obstacle to such a strategy is that the users of Internet Explorer would be cut off from any Web site that did not fall in line with Microsoft's program. This would be a major competitive defect, to say the least. Older versions of Internet Explorer and any remaining copies of other browsers on the market would still be able to gain access to those sites. An immediate market would emerge for new browsers able to reach Web sites that did not adopt Microsoft's server software. Major Web sites, particularly portals, would give away such browsers to ensure their sites could be reached. AOL, as owner of Netscape, would be in a particularly good position if Microsoft altered Internet Explorer to make it incompatible with AOL and other Web sites. Microsoft's hold on the browser market could never be strong enough to let it extract significant value from the server side, despite Microsoft's important roles in providing both a browser and server software. Individual users would not have to play a major role in opposing Microsoft. A few key Web sites--valued in the stock market at tens of billions of dollars--could do it on their own.

Ignorant Elites

Because the Internet is still developing so rapidly, reporters and politicians are easy prey for manufactured panics. It would be much more difficult to create such a fright over a more familiar product, such as automobiles. Nobody would believe today that if General Motors opened its own chain of filling stations, GM would take over all American transportation. But on the Internet, folks who can't tell the male end of a dongle from a TCP stack are often suckers for silly claims about chokeholds.

Merely asserting that a company is a "monopolist" has allowed many of Microsoft's competitors to get a free ride from reporters and policymakers who ought to know better. For example, Jim Barksdale, then-CEO of Netscape, said this to Congress in 1998: "I was struck by the fact, in the response of Mr. Gates to the question about whether or not he was a monopoly, he talked about how short-lived the products were, and we all understand that. That doesn't negate whether or not it's a monopoly though. Even if it went away six months from now, it is a monopoly today." The hypocrisy of Barksdale's claim is astonishing--since Netscape's browser at its height held a larger market share than Microsoft ever had for Web browsers or for operating systems.