Why Microsoft Should Be Left Alone
VIEWPOINT
By BHASKAR CHAKRAVORTI
UNDERLYING the recent antitrust action against the Microsoft Corporation is the belief that technology markets operate differently from other markets in a way that allows certain products to lock in a dominant competitive position.
Regulators and some industry experts make the argument that once such a market coalesces around a product or a technological standard, this technological dominance is difficult to challenge.
As a result, competition may be thwarted, potentially superior products excluded from the marketplace, innovation discouraged and consumers ill-served.
In cases like the one against Microsoft, the Government's concern is twofold: that the market will coalesce around an inferior technology in a way that is harmful to consumers and that a dominant company with a locked-in product will stifle innovation and competition.
Microsoft's market penetration has given it the heft to create a technological standard, with 90 percent of computers now using Windows operating systems. By establishing that standard, meanwhile, Microsoft is also building an infrastructure that its competitors can use to design and market software that is compatible. On the other hand, any competitor seeking to unseat the Windows standard faces an enormous challenge even if it offers a superior technology. ÿÿ
THUS the fear that regulators and others share is that an inferior product will remain locked in, even in the face of a compelling alternative. As evidence, they cite two historical examples: the home video market, in which the technology that locked in was arguably less attractive than a competitor's, and the "Qwerty" keyboard, whose dominance has lasted well over a century.
BETA VS. VHS In the early 1980's, the battle between competing video standards pitted Sony, which had introduced Beta tapes, against JVC, which offered the VHS standard. Beta, which some believed to be superior, lost out when VHS technology locked in the home-video market after gaining an early lead.
But adoption of the VHS standard, rather than squashing competition, opened the door to growth in a host of areas, including video rentals and sales, camcorders and VCR's. Once the industry had settled on a format, marketers and manufacturers were free to pursue innovation. And now, the VHS standard itself may face a challenger in the form of the nascent video disk.
STUCK ON QWERTY Then there is the dominance of a standard that was high-tech circa 1868. The Qwerty keyboard was an awkward arrangement of letters designed to minimize the jamming of keys on manual typewriters by separating the most frequently typed letters.
Machine-age precision and the requirements of an age-old technology made Qwerty the basic typing format to which the world grew accustomed. It survives today on our laptops, personal computers and financial monitors.
Yet in an age when manual typewriters are consigned to attics, technology may soon eliminate the need for keyboards. Indeed, the Qwerty keyboard is ensconced in 3Com's Palm Pilot, a popular personal organizer, but the machine can also recognize handwriting, bypassing the keyboard altogether.
Technology markets do indeed converge on standards, but these do not automatically trap us into a static incumbent product or manufacturer.
In today's high-technology markets, the dominant player survives not through rigid propagation of the incumbent technology but by co-opting a challenger's superior one.
The challenger, on the other hand, can win only through an explicit strategy to make its product the industry standard. In this environment, then, the dominant design is shaped less by the past than by the future.
To see this dynamic at work, one must only recount the recent history of Microsoft's defense against its most significant rivals. Challengers arrived with breakthrough propositions aimed at specific market segments to create a new standard.
Microsoft survived not by crushing the challenging products but, in effect, by making them its own: Windows in response to Apple's graphical user interface; Internet Explorer in response to Netscape's browser and the general growth of the Internet; Net PC and Active X in response to NC and Java from Oracle, Sun Microsystems and I.B.M.
In fact, Microsoft has even introduced its own Windows CE palm gizmo in response to the 3Com product. ÿÿ
THE basic lesson is that technology markets, properly understood, require no more regulatory intervention than other markets.
Regulators need only increase the speed of the competitive dynamic by helping to establish technological standards and by insuring the flow of innovation through enforcement of intellectual property rights.
From a consumer's standpoint, new and superior products will be delivered, though the deliverer may vary. It may be a creative challenger or an entrenched standard-setting incumbent. Of course, the incumbent won't always get it right -- Microsoft has been known to slip up. But that only creates an incentive for the next challenger.ÿÿ |
