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Is Microsoft's victory a win for consumers? (First in/First out).

And so it ends. Finally. With Judge Colleen Kollar-Kotelly's ruling early in November, the five-year legal tangle over the future of Microsoft Corporation has ended. But at what cost?

It appears that the judge's ruling is a victory for the company. But while Microsoft is stronger than ever, there are a few signs that its hegemony may not last forever.

First, consider what will not happen. Redmond will not be split into separate operating systems and applications companies. It does not have to offer competitors a stripped-down version of its OSes that they can alter. It does not have to provide competitors with the IE source code (though it is making some Windows APIs available, which is significant). Microsoft also will not be forbidden from bundling any applications it wants with its operating systems. This last point means that the company can continue to use its monopoly in the PC operating environment to further the adoption of its other products. (The company already controls the office productivity and browser markets.)

Though Microsoft will be barred from retaliatory pricing schemes and from barring or trying to prevent competitors from shipping machines with non-Windows OSes, these strictures were expected. (One stricture that was not expected is that Microsoft cannot prevent applications from other manufacturers from starting when Windows boots, though the true value of such a function is debatable.)

But the real question that few on either side are asking (much less answering) is whether the ruling will benefit consumers. The answer remains far from clear. But there are some possible indications.

Microsoft's operating system and applications monopolies are the company's cash cows and give it a war chest that has no serious competitor: The company has billions in cash reserves--and Redmond recently reported a profit while the rest of the industry was reeling. Thus, while competitors may be able to try once before failing, Microsoft can try and try again until it gets things right; if it doesn't work, just throw more money at it. This means that companies in emerging markets where Microsoft has little influence today (like mobile phones) might see Redmond in the rear view mirror for years until, one day, they see it speeding ahead. Consider a hypothetical. As we know, Microsoft has already begun selling an OS for mobile phones. What if a feature in a new version of Windows allows you to easily update your phone's software for free, perhaps exporting your Outlook contacts, adding games, transferring photos, and the like? All of a sudden, millions of consumers can take advantage of a handy free feature i n Windows that they might otherwise have to pay a Microsoft competitor for. Which phone would you buy?

Sound farfetched? This is precisely what happened with Internet Explorer and Netscape Navigator. And nothing in the ruling will prevent it from happening again. As long as Microsoft gives consumers these features for free, the company line goes, then consumers are benefiting. But do consumers ultimately benefit from reduced choice and from reduced technological innovation? I submit that they don't, whether they know it or not. Who knows how many great new Internet browsing features never made it out of some developer's head because he knew the futility of competing with a browser that comes preinstalled on virtually every new PC in the world? Do we want the same to happen to PDAs? Or mobile phones? Or set-top boxes?

The track record of companies that compete head-to-head with Microsoft is not encouraging. Microsoft's OS and applications monopolies means that it will soon have the financial resources to grind down competitors in any new market the company enters.

That said, there is still some cause for hope, and Linux is one reason. As Linux grows in popularity, Redmond will have no choice but to reduce prices to compete with a free operating system. Just as the company gave away IE to compete with Navigator, so might it cut prices to reduce the financial incentive for customers to jump to Linux.

Further, as PC hardware costs continue to fall and prices of systems drop commensurately, Microsoft will likely be forced by market pressures to reduce the cost to OEMs of its OS--particularly since it can no longer threaten them if they ship other operating systems. Today, Redmond has little competition in the office applications sector, where it controls about 90% of the market. But with each new machine that ships with Linux installed, the power of Microsoft Office is reduced a smidgen. And while Microsoft server software is still ahead of Linux in market percentage terms, Gates and Co. are no longer looking only ahead at Sun and IBM: They are looking behind at Linux.

Thus, for consumers, the news is mixed. Microsoft is not going away, and as long as it maintains its applications and OS monopolie,s and bundles new products, innovation will be compromised. But if these monopolies can be reduced, via Linux or other means, we are likely to see both lower prices and more innovation in the industry.
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Article Details
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Author:Piven, Joshua
Publication:Computer Technology Review
Article Type:Editorial
Geographic Code:1USA
Date:Nov 1, 2002
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