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MS breakup will cost $30 billion?
ibbey writes "According
to a study released today, breaking up MS will cost
consumers $30 Billion dollars due to development,
marketing and support costs required for third parties to
adapt their software to "new Windows descendants," and by
fracturing the market resulting in higher retail costs."
When the microcomputer industry developed in the late 70s, there were many competing OSs and applications. It quickly became clear that compatibility was important, even fundamental, to users. The industry realized that owning and controlling the standards that provided compatibility was an effective way to succeed.
Microso~1 did it best--other companies tried to make Excel and Word compatible formats, but Microso~1 integrated and morphed the "standards" quickly enough to keep them forever behind.
The Internet is killing Microso~1. MS can't control the standards, allowing other OSs, such as Linux, applications (Netscape), and languages (Java), to come back onto the playing field.
In the case, the DOJ and MS's defense-by-self-immolation has shown MS's strong-arm tactics and bullying. The only remedies that matter will be those that prevent MS from owning the web:
1) No folding Explorer into the OS.
As long as you can run other browsers on the Win OS, Microso~1 is dead. As the web becomes more central to applications and information, the OS matters less and less. (True of Linux, too!)
And frankly, I doubt that remedy even matters. The Internet is too large and made of too many open standards for MS to have a chance to own it all. _Everything_ will gradually go open source as everyone realizes that the way to maintain compatibility is open-source, not sole-source.
The DOJ case is just the end of an expensive lesson we spent the last 20 years learning.
Those USD 30 billion would presumably be used for something.
It would mean more jobs, which translates into more money in taxes to the government, and less money spent on welfare, for instance. Of course, unless the baby Microsofts would magically manage to waste 30 billion without causing any new jobs to be created.
They also seem to fail to consider that Microsoft has one of the highest margins in the business.
I find it highly improbable that splitting up Microsoft would increase cost by so much that they'd have to raise prices... Remember, we're talking about a company that manage to get margins close to 50%, while most other hardware and software companies lie in the 10% - 15% range...
Sure, profits might go down in the short run, but with the treat from OS's like Linux, the baby Microsofts wouldn't be able to afford rising prices.
And if the profits would go down, it would be as a direct result of those companies spending more money on R&D and marketing that again create jobs and thus is another benefit of the breakup to the consumer.
As for creating added cost for other companies... Did they consider that if Microsoft is split up, the baby Microsofts might have to consider standarizing the Win32 API? If they don't, yes, it would cost other companies more to support.
But if they don't, then they have proven that the very corporate culture of Microsoft is too perverted to be allowed to live on - if they want to fracture the market while everyone else is working on standarization, they deserve to die.
There have been a lot of comments from the Linux community regarding business models, that Microsoft can't compete with Linux because we're on different playing fields, etc. It's obvious by now that Microsoft aren't interested in competition, i.e. winning by providing a better value than their competitors. Instead, they seem to react to any threat to their market dominance by striking a Faustian bargain with the competitor then calling in their chips, draining the competitor's resources in a Vaporware arms race (the Borland vs. Microsoft OOP war?) or failing those, making their software incompatible with the competitor's products, and/or spreading mis-information about the threat.
Since it would be virtually impossible for Microsoft to "own" Linux, we can only assume they've already defaulted to FUD. The FUD strategy makes the "playing field" issue almost insignificant--Microsoft's marketing department could probably kill Brand X dishwashing liquid if Mr. Gates thought he would benefit. I haven't wanted to consider the tactics Microsoft might resort to in an attempt to supress Linux, but I think we've gotten a look at a few pages from their playbook already:
While Microsoft's representatives continue to claim that Linux is only a toy and that they're not worried about it, they've already started the FUD machine rolling. I wish Red Hat and some of the other "heavyweights" would pick up the ball and fight back with some real benchmarks. Why not duplicate the Mindcrafty benchmarks at IBM's labs, with hands-on assistance from a couple recognized NT performance-tuning experts, Linus and Alan on-site?
slashdot broke my sig
Stuff like this, which seems to suggest that the money will vanish from the face of the earth instead of actually creating new jobs, pisses me off something royal.
Besides, $30,000,000,000 seems like a pretty fair price to pay to get some competition back into the world of computer software, instead of just having one company take over any sector they'd like on a whim. Result: we get better technology and more jobs. Hell, it's a sort of income redistribution for nerds: Getting it out of the hands of the pointy-hairs and the corporations and forking it over to us.
We shoulda done this years ago.
----
Every year during my review, I just pray the words "slashdot.org" aren't mentioned.
These guys are blowing smoke up your Congressional representative's you-know-what.
All of the remedies that the DoJ are investigating that involve breaking up Microsoft involve keeping operating systems intact. The argument is that while a monopoly in the OS market may be a beneficial standard, Microsoft is using that monopoly to stifle competition in other areas; namely in Internet applications, office productivity, etc. In other words, these folks are throwing us a red herring.
In any case, even if the DoJ was examining the possibility of breaking up Microsoft along lines that would split the OS market, there is a good argument that this would benefit customers. Not too long ago, people were raising fears that breaking up Ma Bell's monopoly would end up costing consumers trillions more in long distance services. Instead, long distance carriers are now fighting to offer long distance at 5 to 10 cents a minute, which (when adjusted for inflation) is much lower than what we were paying in the 70s.
Actually, the Cato Institute is not a right-wing group, but rather a libertarian group. Not to repeat what everyone's probably already heard a few times by now, but libertarianism combines economic conservatism with social liberalism: supporting limited government which keeps its hands off both the economy and people's private lives.
This should be distinguished from the right-wing (across-the-board conservative or Republican) viewpoint, which supports government meddling in "morals" issues. Republicans support prayer in schools, the War on (Some) Drugs, and immigration restrictions (just for instance), all of which Libertarians oppose.
In fact, the Republican Party supports far more government meddling in the economy than Libertarians do. Republicans support increased government spending on the military-industrial complex, as well as on corporate welfare. Libertarians oppose both: the government should, we claim, neither help (as the Republicans would have) nor oppose (as Democrats and Socialists would have) corporations, except in cases where corporations violate individual rights. (For instance, Libertarians oppose the use of violence to support corporate interests (e.g. union-busting, colonialist wars (the Gulf War, e.g.), and so forth.)
The "fragmentation" of Unix has allowed Unix to survive when almost all other operation systems that were around in the late 70's have died.
Think about it. How many OSes can trace their roots to something based in the 70's/early 80's and are still at all healthy today? Well, MS-DOS->Windows, Unix, OS/MFT->OS/MVS->?, System-3->System-36/38->AS/400, VM/CMS and that is about it.
You might try arguing VMS, but it is basically dead and you really can't claim that it continues on in WinNT because while there is a developer chain, there is no code from VMS in WinNT. You could also argue that MPE has survived, but I don't think you would call it healthy.
In the early days, Unix wasn't supported by any major vendor, and most vendors actively fought it. DEC labeled Unix as "snake oil", IBM didn't start supporting Unix until very late with the IBM RT, HP dabbled in it, but they really preferred that you used one of their other operating systems. Apollo laughed at Unix and said it was a passing phase, workstations needed an OS that wasn't designed for teletypes.
Today, you can run Unix on the vast majority of computers out there, something that no other operating system can come close to claiming.
I'm not going to claim that the infighting hasn't cost Unix dearly, it has.
However, thanks to the fragementation, Unix can't be kill just because one company goes belly up or decides to make a "strategic switch" to another OS. AT&T tried to get into the computer market in a big way, and then decided to back out, but that didn't kill Unix. Microsoft decided to push Unix (in the form of Xenix), but then got into a spat with AT&T and sold it off to it's largest VAR (SCO), but that didn't kill Unix either.
Linux and the *BSD versions of Unix are in a even stronger position to survive. When 386BSD stopped being developed, other people picked it up from where it left off and spawned FreeBSD and NetBSD. When SLS stopped being updated, Slackware picked it up. If Redhat dropped off the face of the earth tomorrow, no source code would be lost forever the way RSTS has been lost.
Unix isn't the best OS out there. It isn't the best financed. It certainly isn't the best marketed. The fragmented Unix market is the only thing that has kept Unix alive.
Can you honestly say the last 30 years of infighting was a good thing?
YES.
SPF support for most open source mail servers can be found at libspf2.
As usual, RMS hit the nail on the head with his proposal to force Microsoft to reveal/document all internal interfaces and binary file formats in their products - enabling the creation of compatibile competing products, open source or not. Companies (and open-source projects) can still complete on features (even Microsoft) but on a level playing field.
This achieves the nearly same effect in the marketplace as a breakup, without the incentive for the Microsoft (or "baby Bills") to fork their code base (more than it already is, that is).
Who knows, it might also be considered a precedent for how all SW companies should behave (but to make it a universal rule would require legislation). Imagine, a world where software connector conspiracies are illegal!
An esoteric scratched itch:
Homeworld Map Maker Tool
So how does this really differ than trying to deal with the three main versions of Windows (95/98, NT, CE) now? By breaking up MS along these lines doesn't really change the problems:
By breaking MS into 3 OS companies along the existing different Windows platforms, they would still be able to do what they are doing now. MS got to where it is at by controlling the APIs and bundling. Third party developers are always playing catch up with the APIs and the threat that MS will bundle its competing product with the OS.
When I hear people talking about breaking MS up, they are talking about breaking it up along functional lines: an OS company, an user application company, a server app company, etc. That would still keep Windows as it is, but it would make them publish all the APIs, put their app developers on a level playing field with other software companies, and restrict bundling of these apps with the OS. If MS it to be broken up, that is how should be done, IMHO.
the good ground has been paved over by suicidal maniacs
One point that I greatly disagreed with was that software will cost more. At the moment, free software has moved into a position to be a clear competitor to MS products. If a MS breakup occurred, more software would be developed for these platforms, making platforms with inexpensive, well developed, effective software. Obviously this breakup would cost MS money, they would be forced to actually produce good products instead of well integrated, buggy software. If MS has to spend $30 billion, so be it. They have the money from all the years MS has exploited computer users.
One other point that was truly ludicrous was that by breaking up MS, the Justice Department would be punishing them for being too successful. Rather, this would be punishment for destroying competition and exploiting customers.
MS has hurt the computer industry for too long. The computer industry should have the opportunity to use the best product, instead of being forced to use software from one company because of that company's monopoly position. Breaking up MS and opening Windows source code is the necessary measure.
--
Gregory J. Barlow
fight bloat. use blackbox.
Gregory J. Barlow
fight bloat. use blackbox.
Did all of these different versions of DOS run DOS programs? Yes. In fact Caldera has a finding of fact that quotes Microsoft e-mail on this very point, much to the chagrin of Bill Gates.
Was there some sort of consortium set up to administer API's? Not that I know of.
Did this competition cost consumers and the economy? Actually that same Caldera finding of fact has an e-mail from Bill Gates mentioning that he would charge an extra US$30 or US$40 per copy of MS-DOS if it were not for DR-DOS.
So if you calculate the extra burden on the economy from every copy of Windows being US$30 to US$40 too expensive, plus the drag on the economy from so many brilliant minds being lured to work for over-inflated stock options rather than working on other potentially more productive software projects, then US$30Billion doesn't sound so bad.
And if competition scares you, GPL the whole mess. There are too many Windows coders for the code base to "stagnate". Perhaps you wouldn't see the inclusion of voice recognition in the OS, but you finally would see prompt bug and security fixes. And any monkey business with previously unpublished APIs and code breaks within published APIs would be fixed.
And yes such things do exist. Go find Bret Glass's article from last year where he published code demonstrating that Microsoft never removed, just disabled, the infamous DR-DOS message.
Some more of my thoughts on possible solutions to Microsoft v. DoJ.
Thanks a lot for this info! I was totally perplexed when I read the zd article and could not figure out how the OS market would be balkanized. As many ppl have recommended, the nature breakup of MS would be along the lines of the OS (e.g., Windows/NT), applications (e.g., Office), and services (e.g., MSN). If this occured, there would not be a balkanization of the OS as it would reside in only one group.
A more likely scenario would open marketplace with stronger competition in all aspects of software development. Consumers would then eventually benefit from a decrease in costs driven down by real competition.
Finally, MS currently makes a yearly profit of around $6(?) billion on sales of about $16(?) billion. (Note: Last quarter MS earnings were $1.9B on revenue of $4.3B). This is an obscenely high profit margin that is ultimately paid for by the consumer. I bet the good professor did not factor in a reduction in the profit margin to a level commensurate with the rest of the software industry.
The Cato Institute makes Ronald Reagan look like a card carrying member of the ACLU. They actually critized Ronnie when he was President, because he did not strongly push the far right wing economic agenda that they supported. FYI, the other organization to be wary of is the Heritage Foundation.
The Cato Institute (CI) has been a bane for hard-working honest scientists in this country. Their modus operandi (operating procedure) is to enlist the aid of a handful of scientists/mercenaries who get paid to support the views of the CI. They are fully aware that the standard scientific method is one that is generally cautious. Scientific discourse is one of give and take accentuated by meaningful debate. The CI then uses this caution and debate as a sign of waffling and indecision. If 95 out of 100 scientists agree on a particular conclusion, the CI will merely point to the 5 dissenters as proof that there is not overall agreement. Unfortunately, many politicans who are trained as lawyers not scientists, would then agree that there is still doubt. After all, to be found guilty in a trial, *all* the jurors must agree.
Whoever said this should have his mouth stapled shut, because only more idiotic things will come out.
AT&T had similar FUD going on about it when it was about to break up. Breaking up market reigns doesn't cost money to the consumer, it makes money for the consumer. In this case, market fragmentation would create more competition, which, in turn would cause more innovation for less money. Heck, how many distro's does Linux have? How much does Linux cost?
Exactly.
and it will cost the consumer OVER $30 billion if it is not split up in the long run
I was at the "Which Remedies? Appraising Microsoft II" conference yesterday, at which Liebowitz first introduced the results of his paper.
Liebowitz made the assumption that Microsoft would be split into three entities, each of which developing their own competing version of Windows, without any interoperability standards or agreements. Therefore, when companies introduce new applications, they'd have to port it to three different operating systems. Liebowitz (and, presumably, research assistants) directly contacted executives at a number of large software firms (he didn't say how many firms). He specifically refused to talk to assistants, but rather only to executives. He asked them how much they expected their R&D, tech support, and sales budgets to increase, if they had to support three OSs rather than one.
Liebowitz then multiplied these numbers by overall industry revenue figures. He determined that R&D costs would increase by 78%, technical support costs would rise 46%, and sales and marketing costs would rise by 5-10%. He then decided that his overall projections were too high, so he divided the end result by three. (I'm not making this up!). He finally came to the conclusion that software costs would rise about 6-and-a-half percent, or $30 billion.
He also said that Microsoft was a "temporary natural monopoly," which got a small hoot from the economists in the crowd. He said that in the computer industry, there is "sequential replacement of a dominant firm." First VisiCalc, then Lotus 1-2-3, then Excel. First CP/M, then MS-DOS, then Windows, then 32-bit Windows. However, Mark Cooper (Research Director, Consumer Federation of America) rebutted this. Cooper said that there may be sequential replacement of dominant products, but that Microsoft has ended up producing the dominant product in every industry. (i.e. going from MS-DOS to Windows to Windows 95 may reduce the MS-DOS monopoly, but not the Microsoft monopoly as a whole.)
That's pretty much what's interesting about Liebowitz's speech. If anyone wants me to put up the rest of my notes from the conference, let me know.
Personally, I don't like the angle of the ZDnet article. They interviewed two of the three pro-Microsoft panelists at the conference, yet left out any commentary from the other twelve panelists!
Ryan
I would like to know how much the price Id's Qukae 3 Arena was *inflated* because they developed for three seperate platforms. Mac, Windows, and Linux are probably much farther apart in a programming sense than I would assume three versions of windows would be.
Nope. All three versions use standard OpenGL calls, which are exactly the same on all platforms. The only things that had to be changed were mundane, easy things, like setting the video mode and handling mouse/keyboard input. Well, some harder stuff, like networking and sound handling (which can be a BITCH to do realtime mixing), but probably 95% of the code was exactly the same on all platforms.
"Software is like sex- the best is for free"
I would like to know how much the price Id's Qukae 3 Arena was *inflated* because they developed for three seperate platforms. Mac, Windows, and Linux are probably much farther apart in a programming sense than I would assume three versions of windows would be.
If anything, this might lead to software companies writing more portable code an we may even see more variety of software available for the OS of our choice.
Not breaking up windows in the long run will do more harm than good.
GotMilk?
"Religion, opiate of the masses."
Liebowitz initially oversimplifies the problem by selecting a worst-case scenario (for MS) where Microsoft is broken up into three companies, each producing Windows. There are various other reasonable possibilites for breaking up Microsoft.
But what totally invalidates his argument is the the assumption that the different versions of Windows would immediately become so different that they would require vastly greater development resources by software companies. He concludes, through an unscientific survey, that the breakup would cost consumers $30 billion.
Such a scenario is totally unrealisic; it is clear that market forces would prevent severe fragmentation. If one company tried to create an "incompatible" version of Windows, there would be few applications for it, and no one would buy it. What company would write software for a platform that caused it to lose money? Competition would prevent the segmentation that Liebowitz predicts. For example, why has Linux, which is distbributed by a variety of companies, not broken into incompatible factions?
Liebowitz apparently provides no evidence to suggest that Windows would become segmented into incompatible versions.
Furthermore, he ignores the positive effects of the breakup. The benefits of competition would certainly drive down the price of Windows, and thus actually save money for consumers.
Considering the fact that Liebowitz's study was funded by "pro-Microsoft" organizations, a few small errors wouldn't be suprising. But his basic posulations are flawed, leading to a confusion of the facts. Coming from a MS supporter this "study" therefore appears to be nothing but (to use an over-used term) FUD.
Liebowitz has authored other studies and papers defending Microsoft's position. "Dismal Science Fictions: Network Effects, Microsoft and Antitrust Speculation," co-authored by Stan Liebowitz and Stephen Margolis and published last year by the Cato Institute, examined lock-in, antitrust, and the link between quality and software market share, refuting arguments that Microsoft's lock-in position allows it to engage in exclusionary or predatory business practices. The Cato paper was a preview of a book, tentatively titled "Technology, Innovation and Market Competition," due out this year.
Anyone who watches C-SPAN with any kind of regularity knows that the CATO Institute is an incredibly right wing organization. I once saw them actually defending global warming - the reasoning was that winter costs our economy more than the greenhouse effect.
The real reason behind all of this is that they're rabidly against any kind of government intervention in the economy, be it to stop companies polluting the air or monopolizing software.
If you start off with this kind of an ideological assumption, you can prove virtually anything - pigs can fly, global warming is good, and Microsoft is not a monopoly. The only thing you have to do to write these surveys is fit the facts to what you and your friends at the CATO Institute have been believing all along - capitalism is best left unchecked.
Even if you agree with their ideology (and I obviously don't), is this a way to do independent research?
oh, it's gonna cost too much money to restructure the economy of microsoft...
oh, we're punishing microsoft for having a successful system...
if we end slavery it will hurt all americans..
what about the billions of dollars in new companies, new technologies, new innovations that ms has quietly stamped out? are these dollars irrelevant? what about the inflated prices consumers have been forced to pay? where is this cost considered?
i think we all know who is paying our author's rent...