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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Charles T. Russell who wrote (33356)	11/9/1999 2:32:00 PM
From: RTev	Read Replies (1) \| Respond to of 74651

Again fascinating. Thanks for the thoughtful response. [And I'm sorry for the late response. I can't keep up with this thread in the past few days.] You make a number of interesting points about the process of building an OS standard. In general, I agree with your conclusion, "The huge profit potential in the OS market drove Microsoft to innovate and a survival of the fittest mentality prevailed (not necessarily based on just the technology). And MS won that fight. " It did win the fight, but even if one grants that the process of building the Windows franchise was entirely virtuous, we're still left with a question of what happens now. We can grant that the market freely chose to give monopoly power to one company, but the issue is whether it's good for that same market to have a single company that now exercises extraordinary control over the market. You ask if our government understands the phenomenon of quickly-changing technological markets. The evidence is pretty good that it does. Consider what it's done in what is now the highly competitive wireless markets. Without going into all the nooks and crannies of the history, a basic outline looks like this: Regulators originally granted two cellular licenses in each market. One of them went to the incumbent local monopoly telco. The other was auctioned to one of dozens of competitive carriers. In some places, the secondary carrier was more fleet of foot, and managed to gain a dominant position. Regulators stood back and allowed those secondary carriers to mix and match among themselves until they'd eventually created a huge national footprint. But a new problem developed in this duopoly: It was said that the two carriers were ignoring new technologies. So regulators auctioned off new frequencies to new companies. They forced competition into the duopoly, removing regulatory barriers to entry along the way. It's confusing for consumers. The current way of doing things may add extra costs for consumers in the short run. It creates an inconvenience for towns that have to deal with a half-dozen requests for towers in the trees. But the process has created a market in which several different technologies can compete. The computer markets are vastly different of course. In all aspects of telephony, one starts (from the 30s onward) with a highly regulated monopoly and tries to artificially build a competitive market from that. The current computer industry already enjoys a naturally competitive market. Can the market remain competitive without intervention? Most folks on this thread answer that question with a resounding "Yes!" until someone comes along and suggests that Microsoft is in severe straits because of some competitive threat. Most of us who own Microsoft stock do so partly because of its extraordinary market power. We don't have to discuss the market itself on this thread because Microsoft now exists as a market in and of itself. If it were left to its own devices, it could eventually swat down just about anyone that tries to compete on its turf. Are the combinations of markets in which Microsoft competes so resilient and powerful that those markets can, by themselves, rein in a disruptive force that develops within them? I'll admit that that's possible, but I don't think it's likely.