TCS Daily

An Expensive Game to Play

By George L. Priest - April 12, 2004 12:00 AM

Microsoft has more than its share of critics. Competitors resent the company's long reach and sharp elbows. Hi-tech libertarians see it as the enemy of a new world of innovation unencumbered by copyright and patent law. And, of course, antitrust policymakers are wary of its huge footprint in the markets for software.

Perhaps it should not be surprising, then, that the European Commission and its activist antitrust chief Mario Monti last week came to the aid of some of Microsoft's American rivals. Or that Mr. Monti's harsh remedy won some praise from Microsoft opponents on both continents.

But a hard look at what Mr. Monti proposes to do (in contrast to what U.S. courts have demanded of the company to remedy parallel offenses) suggests that Microsoft-baiting is a game that can be very expensive to play. For in attempting to make the markets for software safer for Microsoft's rivals, Europe would undermine both the versatility and reliability of the Windows operating system technology that independent software makers, as well as computer users, depend upon.

Windows, like other successful computer operating systems, has evolved from a barebones utility to a complex platform that performs many of the functions once left to applications software. Mr. Monti views that as a problem: by adding new functions to Windows -- like Media Player -- that make the system more versatile, Microsoft makes it more difficult for rivals, like RealNetworks, to convince consumers to use their alternative software.

The antitrust settlement in the United States addressed this same issue. Microsoft is now obliged to make it easy for computer vendors like Dell and Hewlett Packard to block user access to specific Windows functions -- such as Internet browser or media player -- and to substitute access to software from an independent maker.

But at the urging of RealNetworks and a trade association representing other Microsoft rivals, Mr. Monti rejected this approach. The European Commission is requiring Microsoft to license a version of Windows in which the code that makes up Windows Media Player is physically removed. What's more, the decision opens the door to petitions to force the removal of other functions integrated into Windows. And that is a distinction with a very big difference.

Windows Media Player -- like any of a dozen other Windows features -- is not a discrete piece of software that can be attached or removed like the bumper of a car. It is thousands of lines of instruction woven through Windows that serve multiple functions. Removing Windows Media Player -- in contrast to just hiding it from users' eyes -- would thus make some software run poorly on Windows, and even render some software useless.

No one knows what will happen if the Windows Media Player decision survives appeal -- or worse, if the European Commission extends its logic to other Windows functions. The most benign possible outcome, perhaps, is one in which Microsoft spends a lot of money to patch together a media-player-free version of Windows that mostly works, but that no major computer maker chooses to install in their products. The Justice Department tried a similar policy: It demanded that Microsoft offer a browser-less version of Windows. No one wanted it.

It would be nice to believe that the policy of the European Commission is a one-time aberration in which they forgot how Windows functioned in their passion to teach Bill Gates and Company a lesson. But I think the problem is more fundamental. The antitrust standard in Europe is based on the concept of "dominance." The Commission's zeal to reduce Microsoft's dominance in order to give Microsoft's rivals a better chance has led it to reduce the utility of Windows. But this is confusing the goal of aiding competition so that consumers benefit with aiding competitors. And in the process, it is risking the interests of the group that ought to count most -- consumers who want the most versatile operating system available.

George Priest is the John M. Olin Professor of Law and Economics at the Yale Law School. He has served as a consultant for Microsoft but was not involved in the European litigation.


TCS Daily Archives