A Look at Microsoft's Regulatory Problems

jrexilius writes: "The Economist has a great article on the state of the EUs anti-trust case against microsoft, background, and future troubles with google. One interesting comment was 'Microsoft is preparing to use its dominance in web-browser and operating-system software to promote itself in yet another separate market--search engines this time'."

Comments

Fishy company

[krray]

Microsoft's contracts with PC-makers required them to pay it for a copy of Windows for each PC sold, even for PCs that were sold with other operating systems, or with no operating system at all.

This is exactly what REALLY ticked me off with them (in the IT adm position no less). I put up with their marginal quality on the desktop up until this point. Sure, part of me still wished I had gone OS/2 there as well, but I digress. I certainly still remember buying PC's that I had to pay the Windows tax on ... even though they still run Linux to this day (except one actually which is one of the Netware servers).

Microsoft may some day conclude that the costs of constant regulatory battles--legal costs, fines, bad publicity, and bad relationships with governments--exceed the benefits of its Windows monopoly.

One can only hope. In the mean time it's still Linux in the data-centers and my basement for that matter. OS.X on my desktop, thank you very much. And yes, they talk NFS and not SMB with each other as well. It's faster... You know what I've learned at the offices that have agreed to run Linux and/or Mac's? Within one year it's obviously cheaper and faster than before. Almost ironical after reading all the Microsoft funded ROI type studies showing the exact oppisite. I thought something smelled fishy.

Re:Fishy company

[October_30th]

required them to pay it for a copy of Windows for each PC sold, even for PCs that were sold with other operating systems

Which, of course, is an exaggeration. Any such requirements come from the deal your shop has signed with Microsoft. If the contract stipulates that in order to get OEM discounts you must sell MS Windows with every piece of complete hardware you sell, that's a perfectly reasonable clause.

Re:Fishy company

[NoOneInParticular]

It might be a reasonable clause in the case of a competitive market where OEMs can pick any OS-vendor and strike a deal with them, but in the current world it doesn't work that way. If you sell PC-hardware, then you have to provide Windows. If you don't strike this deal, you go belly up. That's the nature of Microsofts monopoly, and that's why such deals should be illegal.

Re:Fishy company

[NoOneInParticular]

Forcing everyone to use their product is not what a monopoly makes. Obviously everyone could have gone without railroads in the time of the robber barons, right? You don't really *need* a telephone right. Sure you can refrain from using windows when your entire network of suppliers, customers, government, bosses, etc. assume you use windows/office and communicate with you through that?

There's also nothing unfair about a monopoly per se. Many monopolies exist, and they're not neccessarily evil. Nor are monopolies per se illegal. In Microsoft's case, it was the leveraging of the monopoly that was deemed illegal, *not* the monopoly per se.

The point I'm trying to make is that if you get into the situation where you want to sell a product (a PC), and that without striking a deal with the supplier of a part of that product (the OS) you will go out of business, simply means that there's no competition and the supplier possesses a de fact monopoly.

Re:Fishy company

[NoOneInParticular]

Sure, it's market driven. Save for the thug approach, all monopolies are market driven creations. MA Bell won the phone market, IBM the mainframe market. Purely market driven.

This does however not mean that monopolies should be left alone, as at some point such a monopoly will start hurting. This is why there are different sets of rules for monopolists versus competitors in a market. For one, barriers to entry must go. One barrier to entry is the Microsoft tax we're discussing currently. It's been set up when MS was on its way to becoming a monopoly, but now that it is has succeeded, the barrier must go. With such barriers in place, there is simply no possibility of a competitor to enter the market, let alone succeed. It's a simple case of making sure that any PC vendor has access to the same pricing of windows as their competitors. MS can still set the price, but cannot play favours. They lost that privilige once they won.

Re:Fishy company

[nathanh]

Which, of course, is an exaggeration. Any such requirements come from the deal your shop has signed with Microsoft. If the contract stipulates that in order to get OEM discounts you must sell MS Windows with every piece of complete hardware you sell, that's a perfectly reasonable clause.

Except for those pesky antitrust laws, sure.

The FTC (Federal Trade Commission) and DOJ (Department of Justice) got Microsoft into trouble for exclusive OEM deals back in 1994.

The OEM exclusive licensing was part of the FTC investigation. From that link

The major illegal practice cited in the complaint was that Microsoft imposes a per processor license fee on OEMs, which means the manufacturers would have to pay Microsoft a royalty for each PC they sold, even if it did not include a Microsoft operating system. See the section on OEM Licensing Issues for details.

The FTC and DOJ didn't consider per-processor licensing to be "perfectly reasonable". Microsoft settled out of court rather than go to trial; they knew they would lose.

That settlement led to the Microsoft Consent Decree. Basically Microsoft promised never to do it again. This attracted criticism from Judge Sporkin who said:

Simply telling a defendant to go forth and sin no more does little or nothing to address the unfair advantage it has already gained

Of course, Microsoft violated the Consent Decree in 1997 in order to destroy a new company called Netscape. The Consent Decree was worthless (as many people said it was).

Re:Fishy company

[Ironica]

You go belly up because the market DEMANDS MS products. There are no MS thugs with guns forcing companies to sell MS. It's completely and entirely market driven.

Oh, puh-lease. I suppose it was the market that drove MS's decisions to put fake error messages in Windows 3.1? That it was simply a market phenomenon when MS violated their joint development agreement with IBM by telling developers to code for Windows instead of OS/2? That the consumers demanded them to exploit dozens of cooperative development agreements with all kinds of companies, which were only made to send software engineers in to steal code and then incorporate it into Windows? Remember the Stacker settlement? They were a tiny slice of the pie.

Anyone who thinks that Windows is the dominant OS because "it's just better" is fooling themselves. MS did many, many things that were at best unethical and usually illegal to obtain their dominant position in the market. They've been convicted of it, for crying out loud. Get over it: they're crooks. Just successful ones.

Search engines are a "low cost" change

[Anonymous Coward]

For users, changing operating systems, and even browsers, can be quite painful. In the case of an OS, old apps might nor work, and you might have to learn a new interface, and there may even be a cost of purchasing the OS. For browsers, it's hard to become aware of alternatives (for regular folk) and a download (on dialup) may take a while. For search engines, though, it's simply a matter of loading a new page, and maybe changing a setting somewhere. Not to mention the fact that even common folk know about Google, and it's become a part of the language. MS can't just "win" the search engine war by pointing users there by default.

Re:Search engines are a "low cost" change

[Davak]

MS can't just "win" the search engine war by pointing users there by default.

To quote the article now:
[Google] accounts for 35% of search-engine visits--compared with 28% for Yahoo!, 16% for AOL and 15% for Microsoft's MSN

Do you really think that 31% of the population feels that Microsoft and AOL searches are better than google?

No. Users do not know better. They just click, and click, and click -- until they find their answer. You and I and most of slashdot knows that google would probably give you the answer quicker and better. 31% of the people out there just blindly search with whatever the easiest search option is...

Now Word and other Microsoft programs send information to various web sites to get translations, directions, and other additional information.

MS and AOL may not be able to win by pointing users to their products; however, they can drain enough money from the rest of the field to drive some better products into the poor house.

Davak

Re:Search engines are a "low cost" change

[shaitand]

Man are you off. You realize that most users STILL do not know the address bar exists or what it is for? There are a huge number of users typing web addresses they are given in the MSN or AOL search box.

Since typing the address in the search box generally brings up the link they think that is how it's done and never know better.

Trust me, these people are just using whatever is there, not changing to anything.

True story. An old man called who had recently bought a windows pc from our shop. He said he was having trouble with his computer, so I talked with him about several minor issues, helped him get the bar back to the bottom on the screen (he had it docked on the left side and expanded to half the screen), typical user. At some point I suggest he use google for searching and gave him the address.

A month later his modem went out and I went onsite for the service call, after fixing his modem I searched for cleaned off the spyware on his system and launched his browser. Msn.com. "So you didn't go for google eh?" I asked. "No I love it, I use it all the time!" he exclaimed and proceeded to tell me how great google is, I let him take the chair. I turns out he has been starting his internet use by typing www.goole.com into the MSN searchbar and then clicking it, then doing his searches from google.

The guy though msn search was where you put web addresses and google was a search engine where you search for terms. I think I tried setting google as his home page but he didn't get it, I think he ended up having a kid or grandson change it back.

Moral of the story, people are idiots. Just accept that and you will be much happier in life.

Go Google Go

[Davak]

Microsoft may have software on the majority of computers sold... but my god, we all use google.

In the land of pirating with ease... the man who holds the data, not the software, will win.

Bill isn't dumb... and realizes this; thus, the push into the search engine world.

One more reason that I really like google.

Davak

Re:Go Google Go

[Chess_the_cat]

And AltaVista, WordPerfect, Macs, and typewriters. Just because everyone is using Google now doesn't mean we all will 10, 5 or even 2 years from now.

Re:Go Google Go

[Davak]

I disagree...

Google has the data.

Netscape had a physical piece of software.

Google has one (the?) largest collection of web data indexed. One way they use and abuse this is the way they can give such targetted ads on web sites.

Their little text-based ads rock the socks off other ads... Is it because people just are drawn to the little google boxes full of text? No... it's because the ads so closely related to what's on the page.

Data is going to rule. Even microsoft realizes that google has beaten them to the punch.

Could google screw up (like netscape)? Sure! Right now however... they are sitting pretty.

Davak

In some ways, Bill Gates is poor.

[Futurepower(R)]

As far as I know, Microsoft has only made money in areas where the company has a temporary monopoly, or where being aggressive temporarily makes a profit.

Microsoft has a history of bad management, especially in thinking that the company can be aggressive toward customers, without paying any penalty.

If someone had a monopoly on water, he would make so much money that he would make Bill Gates look poor in just a few days. To unskilled observers, temporary monopolies make those associated with them look like skilled businesspeople.

When you are a billionaire, what is your biggest need? Is is to make more money? No, your biggest need is for connectedness with other people. By his aggressive behavior, Bill Gates has enforced disconnectedness, and he is in that sense a poor man.

The most important bits

[Space cowboy]

... are that

1) MS might be forced to either bundle competitors (Go Ogg!) or disable Windows media (which the commission don't seem to fancy)

2) The commissioners claim to have learnt from the mistakes of other regulators when dealing with MS, and have pre-emptively included a number of 'you can't do it *this* way' examples in their recommendations :-))

Simon

Disagree

[iamwahoo2]

I still find google incredibly useful. It turns up things no other search engine does for me. An they should not try to copy Yahoo. If I want yahoo, I will go to yahoo. Each engine has its strengths. The trick is to be distinct so that users know which engine turns up the best results for different types of searches.

How Microsoft Will Attack Google

[Davak]

Google has more data that Microsoft. Google is a better search engine than MSN. I don't think that anybody disagrees with this. However...

The next step, inevitably, will be to integrate such search functions into Windows, on the grounds that it constitutes a core technology that should be part of the operating system. In his keynote speech at last November's Comdex show in Las Vegas, Mr Gates demonstrated a prototype technology called "Stuff I've Seen" which does just that. It allows computer users to search for context-specific words in e-mails and in recently visited web pages, as well as in documents on their computers.


Microsoft has it's reaches into the majority of homes and businesses in the world. As broadband always-on internet becomes more popular, more and more services will really be clicks to other sites.

Here I describe one of the ways that microsoft uses this in the new version of Word as a translation machine. The information goes out onto the internet and word brings you back the information pretty seemlessly.

This is where Microsoft knows how to crush their enemies. By using easy clicks with integration, they can direct people to Microsoft search, translation, music, or whatever.

As the article states, before long your searches and data will be references my Windows software in multiple ways. Windows doesn't just want the web integrated into your system... they want their web integrated into your system.

Davak

Search Engines, Portals, Etc.

[Some Clown]

In the last few years there has been a lot of hype, at least with business folks, that Web sites like Yahoo, Google, MSN, Netscape would become big "Portals." on the Internet, driving all others into obscurity. It sounds like Microsoft to a certain extent may still believe this. You control the results of the search, you are in a position to profit from it. To quote the certain to come business advice:

(1) Leverage monopoly to get into search engine business
(2) ??
(3) Profit!

What I've seen in practice however, is quite different. It seems as if the new users tend to get sucked into the "portal" concept when they sign up with Earthlink, MSN, etc. But as they become more Internet savvy, they migrate and spend less and less time on those sites. It's like a giant ponzi scheme... once they run out of new people to sign up, they're done.

I guess with the speed of the tech cycle right now, If Microsoft profits off of something like this for even a couple of years, then it's worth it (well, duh... Hmmm... case of the painfully obvious this morning.) Bottom line though, I think at this point Microsoft is still coming in well above negatives like costs to litigate, negative regulatory environments, bad feelings, slashdot insults, etc. Microsoft is a business, bottom line, as soon as it gets more expensive to work this way... they'll change strategies. As long as this is working, which it obviously is, they'll stick with it even if God himself came down and said stop.

Re:Well, really

[iamsure]

Microsoft isn't a monopoly, per say, they're just really successful.

You are confused about what they have a monopoly IN. Multiple courts ruled that they were in fact a monopoly. You seem to be under the false impression it is for being a PC monopoly - far from it.

They have become a defacto OS monopoly - while there are other choices, they leverage their market share to ensure you can't, shouldn't, or won't want to use a competitors product.

Good companies encourage you to choose their product OVER the competitors, monopolies discourage competitors products through control, price gouging, and more.

Re:Well, really

[Xtifr]

Microsoft isn't a monopoly, per say, they're just really successful.

Tell it to the judge, bub! Seriously, they may not meet ONE OF THE dictionary definitions of "monopoly", but they most definitely meet the LEGAL definition, which is what's important here.

And furthermore (and this is a point that proponents of both sides often seem to miss), there is nothing wrong with having a monopoly! What's illegal and wrong is abusing your monopoly position. Both Intel and Cisco have been found in court to have a monopoly in their respective markets. But both have been cleared of any charges of wrongdoing (rightfully so IMO).

Splitting up Microsoft

[LippyTheLip]

I found the following quotation in the article particularly enlightening:

Microsoft has come to a critical juncture. It can choose to continue its war of attrition with regulators, constantly testing the legal limits and, when it crosses them, treating the consequences as the cost of doing business. Or the company could throw off its monopoly mindset and decide to compete, like most other firms are forced to do, solely on the merits of its products.

If history is any guide, it is not difficult to predict which of these two paths Microsoft will take. On the other hand, there are a few examples of companies that have begun as monopolies and actually ended up increasing the value of the company faster after being forced to give up their monopoly position. For example, after the breakup of AT&T in 1982, the companies formed as a result have grown much more quikly. According to this article at Businessweek

The breakup created an array of choices that consumers still find confusing. But it's widely agreed that it lowered long-distance prices and stimulated innovation. The companies created out of the Bell System, including those since swallowed up, are worth about $810 billion today, vs. $59 billion before the breakup. That 1,300% gain compares to a market-cap rise of just 140% for IBM over the same period.

So... Microsoft splitting itself up would be good not only for consumers and competitors, but perhaps also for its stockholders.

Cool Search Engines

[iamwahoo2]

There are a lot of unknown quality search engines out there. One of the tricks with search engines is knowing which was is going to turn up the best results in a particular search. In addition to google, I highly recommend www.alltheweb.com, and dogpile.com.

But one that I have really come to like is vivisimo.com, check it out, and after performing a search ecspecially take a look at the "preview" feature

Re:Why all the Micorsoft hate?

[errxn]

Parent has a point. While there are things I both like and dislike about Microsoft, I do get kinda sick and tired of seeing a story get posted on /. every time Bill Gates picks his nose in public, or something equally inane.

Yes, we're all aware of Microsoft's business practices. Yes, we're all aware of the faults in their OS code. No, I don't want to hear about it every FREAKIN' five minutes. Also, if there is such interest in Microsoft, why don't we ever hear about the good things that they do (save your "because they don't do any good things" replies)?

Take ASP.NET, for example. I've worked with JSP/Servlets, PHP, and "old-school" ASP, and nothing is better or easier to work with than ASP.NET, IMHO. Before you bad-mouth it, why don't you actually try using it? Plus, if it sucked as bad as some people on this site claim, why would Ximian, et. al. be working so hard on Mono?

All I'm saying is that there should be credit where credit is due, and that it would be nice if every nitpick associated with Microsoft didn't rate a new topic on /.

I know, wishful thinking.

Re:Well, really

[El]

The Electric Company isn't a monopoly, per say, they're just really successful. If the Electric Company were truly a monopoly you would only be running your car, boat, and homes with energy from the Electric Company powering hardware supplied by the Electric Company. The Electric Company may be market dominant, but they're not the only choice out there. You can always install gasoline, diesel, propane or natural gas fired generators, solar panels, windmills, or whatever else to generate your electricity. You can even use electric power to power hardware not supplied by the Electric Company. Plus, no one's forcing you to use electricity!

If it looks like a duck, quacks like a duck, and acts like a duck, then it's a duck. If it's able to exert monopolistic control of a market or markets, then it's a monopoly.

Its really about Real not being able to compete

[WhoDaresWins]

You know the whole issue of tying WMP to Windows being an issue is silly. Hello!, Windows Media Player has been included with Windows for free since Windows 3.1 days (yeah go ahead and check it if you don't believe it). So for many many years MS was including WMP with Windows and Real did not have a problem with it? Suddenly one fine day Real has issues with it? What has happened is that MS came up with a superior product ever since Windows Media 8 and started kicking Real's *ss. Who would want to use Real's intrusive annoying player when a better alternative was available?

With Windows Media 9 Microsoft really started shining in the Media Player arena and Real instead of competing wants to run crying to momma. Get a clue Real! If you hadn't abused your users with the intrusive crap of player you had then no one would have looked for alternatives. As long as WMP was inferior, Real was in fact the one abusing its dominant position by shoving a pathetically intrusive player on its users. Guess what they did when they had an alternative? Real squandered away its lead when real (pun intended) competition was coming its way. I guess it was sheer haughtiness on its part that it thought no one could beat it. When it has finally woken up and realised that no one is going to give it a second chance, then guess what happens. WMP9 is what decimated Real since its a much superior product overall compared to Real. Now the irony is that WMP9 is not bundled with any OS but is a separate download. Yet inspite of that its usage is skyrocketing.

The other story in all this is how Apple has been able to keep QuickTime alive and not face Real's fate. Well the QuickTime player also does some bad things (like adding itself to runonce reg key) but overall it respects its users a lot more. QuickTime and Windows Media are now the most dominant Media technologies on the net. So how come Apple is not complaining about Windows Media? How are they able to hold on to the market? Clue to Real: They actually compete. They care about their users and make a better player or better codecs (Apple has very good support for MPEG4). This whole media player tying issue looks like some kind of EU vendetta against a large US company. In fact the original case wasn't even about this till Real went crying to the EU comission. Makes me sick. What next? Tying of WordPad to Windows will become illegal since that hurts AbiWord? How silly can people get really.