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To: Bearded One who wrote (18853)	5/1/1998 11:45:00 AM
From: Gerald R. Lampton	Respond to of 24154

You may be right, but it really depends on how you define the market. For example, do you define the market as the set of all operating systems? Or the set of all operating systems which run on x86 PCs and can run old DOS and Windows 3.1 programs? You are absolutely correct -- it does depend on how you define the market. The bigger and more inclusive the market, the smaller Microsoft's share becomes, and the more difficult it becomes for Microsoft to, as Bork would put it, restrict output and raise prices. I could be wrong, but, based on a reading of the Consent Decree filings, it seems DOJ wants to define the relevant monopoly market as that for "PC Operating Systems." In any event, DOJ would want to define the market as narrowly and precisely as possible to make Microsoft's share of and power over that market seem as pervasive as possible. Both software and military hardware are complicated, but perhaps for different reasons. The fact is, when we talk about monopolistic software practices and Microsoft, we're talking about a few dozen of products, or even just a handful if we restrict ourselves to the OSs and IE. When we talk military hardware we talk tens of thousands of products. That's just one difference. So I'm not sure that you can replace one term with the other. Well, again, you may be right, but the government only orders so many different kinds of tanks, bombers and missiles. Each of these products is highly complex, consisting of a gazillion components being produced by a highly complex supply chain of subcontractors and being assembled by a single general contractor such as a Lockheed. So even though components and spare parts number in the zillions, the final, finished products number in the dozens or hundreds. I would argue that software is the same way: a gazillion modular components assembled into a few dozen finished products, maybe a few hundred if you think of upgrades and patches as the "spare parts" of the software industry. In the case of software, the supply chains are usually within a single company. Maybe that's a difference that matters, but I would argue that the industry does not have to be organized that way and probably will not be in the future (Read "Superdistribution," and you will understand what I mean by that last comment). Plus, as I read his comments, he's saying that level of technology and the pace of technological change, not the number of products, are what make military supply markets complex. Finally, I think in the case of Microsoft, Bork's comments so far are about contracts that exclude competitors without an increase in efficiency for the consumer, not technology. I would imagine Bork will want to talk about contracts and general principles while Microsoft will probably want to talk about technology, each side trying to draw the other into its area of strength and the other side's area of weakness. One question that comes to my mind is: why did they hire Bork? It's an obvious PR coup because it neutralizes a lot of conservative criticism of the Microsoft case. But I suspect there's more to it than that. When they held the news conference to announce that they had retained Bork, they said that he would be lending his theoretical expertise to new areas of antitrust theory, like network externalities or increasing returns. I suspect that, in order to win, they feel DOJ will have to make these arguments, in front of an audience of judges for whom these arguments presently lack a certain credibility. It may be that they hope Bork's presence will lend these arguments that credibility. So in my view, no smoking hypocrisy gun just yet, though these are intriguing comments of his. The final comment of my last post is probably a little too harsh. For the record, I do not believe at this point that Bork is intellectually dishonest (politically reprehensible, yes, but intellectually dishonest, no). I just think it's something worth keeping an eye on.