Accept Victory

24 December 2004



Microsoft "Loses" EU Court Battle

Back in March, Microsoft lost a legal case in Europe that cost it €497 million (currently $664 million, while the dollar drops) and required it to sell its operating system without its Media Player software and to open up its code to other software companies. Microsoft appealed and asked a judge to halt the sanctions while the case went ahead. Since the case will take another two or three years, that means Microsoft wouldn’t have to act for a couple of years. Judge Bo Vesterdorf, president of the European Court of First Instance, told Mr. Gates’ company to act now. Doesn’t Microsoft know when it has won?

The ubiquity of Microsoft’s operating system, combined with what most computer scientists describe as inelegant programming and its high likelihood of crashing, makes the company a target. However, as a privately held monopoly (Apple, Unix and Linux notwithstanding), Microsoft as a producer of a computer operating system does not operate in a real market, and so it merits being a target. The only thing worse than a regulated monopoly in economics is an unregulated one. When Microsoft turns to applications that run under its operating system, then it operates in a more perfect market.

And that points to an obvious move that politically has proved impossible – the break up of Microsoft into two entities, a regulated monopoly that develops the OS and a private software house that would compete with other program makers. Since that isn’t going to happen any time soon (the election of Mr. Bush stopped it), cases such as those involving Judge Vesterdorf will occur from time to time.

Microsoft has decided to bundle its office programs, mail service, web browser and other features with its OS all installed on a computer that is as plug-and-play as one can get without moving to Apple. This may have kept the competition down, but frankly, it has also kept revenues down as well. Some have compared buying a computer to buying a car – who would want to have to buy the engine separately? But this is to misunderstand the analogy. GM, Ford, and Daimler-Chrysler don’t make their money on the engine, but rather the profits mount up on the whistles and bells. Microsoft could have been selling its applications separately from its OS, and probably done far better financially. While it is true that that would have offered competitors access to its space, is it better to earn a million without competition or two million with it? And if one has better software (debatable when it comes to Microsoft), competition is not a real threat.

Now, a judge in Europe has ordered Microsoft to sell its OS without its Media Player. So be it. Microsoft should drop its resistance and accept the opportunity to sell the OS at the same price, and offer the media player on a disk for €5 or €10. That’s extra revenue for every computer sold in the EU. Of course, the real threat to Microsoft is not in the courts of Europe but rather the open source arena – free software that is given away. Readers are encouraged to visit openoffice.org and try the office suite, which is used here, and it is the intention of the Kensington Review to switch to a Linux operating system in the New Year.

© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.

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