Consumers will lose if states win Microsoft battle
By John Barrett
BHI Research Economist
Attorney General Thomas F. Reilly's
first duty is to the citizens of the Commonwealth. However, his
pursuit of antitrust penalties against Microsoft is both counterproductive
and harmful to Massachusetts consumers and producers.
In joining with eight other
attorneys general to limit the ability of Microsoft to bring its
products to market, Reilly is carrying water for Microsoft's competitors
- firms such as Sun Microsystems, America Online, and Oracle that
are, in effect, banking on the courts to accomplish what they have
been unable to do in the open market. It is these firms, not the
citizens of Massachusetts or the other states bringing this case,
that stand to benefit from the sought-for penalties.
Consider the problem that the
nine states want to "correct." The problem is most certainly
not that consumers have no choice but to use Microsoft's Windows
operating system. Consumers are already free to choose Macintosh,
Linux, or any one of the several versions of Unix.
Now, thanks to a settlement
between Microsoft and the Department of Justice, consumers will
be free to unbundle any of the middleware products, such as Internet
Explorer or Windows Media Player, that Microsoft has traditionally
integrated into its operating system, and instead use competing
The "problem," as
the nine states see it, is that the DOJ settlement allows Microsoft
to leave intact certain kinds of code, called application programming
interfaces, or "APIs," that third-party software manufacturers
need to develop their products.
The Windows APIs allow software
developers access to Windows' full functionality when writing and
debugging programs. Because Windows is widely popular, Microsoft
saves software manufacturers billions of dollars by building its
APIs into its Windows operating system.
The nine states would require
Microsoft to produce, along with its regular Windows operating system,
a "modular" version of Windows from which it has removed
all Microsoft middleware components, including its APIs. Presumably
this would encourage computer manufacturers to use middleware products
made by Microsoft's competitors, so that, for example, a computer
would come equipped with Netscape Communicator rather than Microsoft
This increased competition in
the middleware market is not, however, the prize sought by the attorneys
general. Rather, they are betting that, by forcing software manufacturers
to write to a variety of middleware APIs, they will spur the development
of rival operating systems, thus further challenging Windows' hegemony.
The problem, however, is that
there is no reason to put any faith in this joyous outcome. There
is no evidence that any of Microsoft's competitors is champing at
the bit to develop an operating system or, if it is, that the operating
system it develops would compete effectively against Windows.
Then there's the matter of cost.
In pursuing the illusory goal of new competition in the operating
system market, the attorneys general would inflict unnecessary financial
harm on software developers and consumers. They would force software
developers, who must now write for new hybrid versions of Windows,
to produce several versions of their applications, driving up developing,
debugging, and marketing costs. A portion of these costs would be
passed on to consumers.
Massachusetts' burgeoning high-tech
sector and many colleges and universities all stand to lose if the
attorneys general prevail. A recent study by the Beacon Hill Institute
at Suffolk University, "And Then There Were Nine:+ The States
v. Microsoft," assesses the impacts of these remedies on the
Commonwealth. The study shows that Massachusetts consumers would
incur $625 million in extra costs, while Massachusetts software
producers would see their costs rise by more than $3 billion over
the next three years.
Many Massachusetts software
manufacturers are already struggling to survive. The added costs
of providing products for a fragmented Windows market could easily
force these firms to close up shop, thus making their products unavailable
to consumers. The test of any good antitrust settlement is how it
treats consumers. On this fundamental measure, the litigating states
Reilly is badly serving his
constituents by pursuing this chimera of a remedy. He would do better
to find some other case on which to build his legacy.
This article appeared
in the Boston Sunday Globe on
May 12, 2002
Format revised on 18