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The thoughts and theories of a guy who basically should have gone to bed hours ago.

I know, I know - what's the point? But look at it this way - I stayed up late writing it, but you're reading it...

Let's call ourselves even & move on, OK?


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Tuesday, May 09, 2006

EU to Microsoft: Don't Build Any New Products Ever Again


The EU is considering action against Microsoft's forthcoming version of Windows, Vista. They're concerned that it will violate the ruling handed down by the second highest court in the EU in 2004.

Here's the quote that caught my eye:


Competition Commissioner Neelie Kroes told Microsoft in a letter in March that its plans for Vista could "deny PC manufacturers and consumers a real choice among competing software products and stifle innovation", the Commission said.

That's quite a stretch, isn't it? Putting out a new product will deny consumers choice and stifle innovation? And, I suppose we're to assume that the converse is also true: preventing Microsoft from releasing (i.e., innovating) a new product (i.e., another consumer choice) would (somehow) provide consumers with more choice and encourage innovation?

At particular issue, it seems, is the planned XPS format, which will compete with Adobe's PDF format. Adobe has a near-monopoly in this space today, much like Microsoft's monopoly on the PC desktop. As far as I can tell, XPS will have an advantage over PDF, because the ability create XPS files would come included with Windows (you can download Adobe's PDF Reader for free, but you have to pay for software to create PDFs). PDF would still have the advantage of being cross-platform (Microsoft will allow royalty free licenses for XPS, but will only produce XPS software for Windows), as well as the huge advantage that Microsoft has today - ubiquity. PDF is a valuable format principally because everyone can read it. XPS will make a dent for sure, but will have quite a hill to climb to unseat PDF as the market leader. But regardless of whether XPS replaces PDF as the industry standard, I'm still lost as to how putting a competing product in the marketplace limits choice and stifles innovation.

If anyone's stifling innovation here, it would seem to be the EU. And it would seem that we could point specifically to which innovation their stifling (Windows Vista).

The irony of the whole thing is that the EU is stymied by its own litigiousness. Microsoft has appealed their previous case to the highest court in the EU (the Court of First Instance). If they sue for changes to Vista based on that previous ruling, and the CFI overturns all or part of it, it could invalidate their Vista claim right out of the gate. On the other hand, if they wait to see what the CFI will do, Vista may be released in the interim, reducing their ability to influence changes.

I think this is starting to smell like a vendetta against the front-runner - in this case, Microsoft. I can understand the need to keep the playing field level, offer consumers the most options, and encourage other firms to compete. But if doing so means that the organization with the most resources and, arguably, the most experience is not allowed to compete at all, then aren't we throwing the baby out with the bathwater?

posted by Brian at 1:03 PM


5 Comments:

  • Correction: PDF writing is built into Mac OS X, and is available for free on Unix. I presume there must be a dozen Windows ports of similar software. You need to pay for Adobe Acrobat only if you need to use the latest PDF options which remain proprietary.

    Stifling innovation: you did study anti-trust history, right? Obvious example: Microsoft promotes XPS heavily. All Mac users get XPS readers. Third parties create XPS utilities for Macs, Unix, Palms and Seiko data watches. PDF usage grinds to a halt.

    Then Microsoft revokes its royalty-free licenses and begins charging. Hey, it was right there in the EULA. Didn't you read it?

    Lest we forget, we've been through this before. GIF stands for CompuServe Graphic Interchange Format. MP3 and JPG are owned by various recording industries. These copyrights have occasionally been asserted.

    Microsoft is today's Ma Bell and Standard Oil. Most economies understand that capitaliism can destroy itself by creating monopolies. At least, we did once, and forgot. The EU apparently hasn't.

    By Anonymous Jeff Porten, at 4:57 AM, May 15, 2006  


  • Correction: PDF writing is built into Mac OS X, and is available for free on Unix. I presume there must be a dozen Windows ports of similar software.

    To be honest, I always assumed those apps were illegal. But yes, you are correct - they exist on Windows as well.

    Obvious example: . . . PDF usage grinds to a halt. Then Microsoft revokes its royalty-free licenses and begins charging.

    OK, but by that logic, shouldn't we shut down Adobe right now before they do something horrific like start charging for Acrobat Reader? Products that become wildly successful at zero cost often have their copyrights taken away. You mentioned GIF, MP3 and JPG. I can think of at least one other: ZIP. And then there are all of the brand copyrights that disappeared into public domain: like "Frisbee."

    Microsoft is today's Ma Bell and Standard Oil. Most economies understand that capitaliism can destroy itself by creating monopolies. At least, we did once, and forgot. The EU apparently hasn't.

    Bad analogy. Microsoft is the Ma Bell/Standard Oil of the PC Desktop. They're not even the leader in the portable document space, let alone the monopoly power.

    As for capitalism destroying itself by creating monopolies, I have no idea where you got that idea. Our capitalist society has had (and still has) many, many monopolies and has consistently failed to destroy itself.

    Some monopolies (Standard Oil, AT&T, IBM) are controlled by legal proceedings. Others (Amtrak, the USPS, regional energy companies, regional cable companies) are institutionalized and protected to maintain acceptable and consistent levels service where profit margins might suggest otherwise. And as I've written before, the technology industry in particular has effectively used monopolies throughout its brief history to make major advances while maintaining the highest level of consumer choice and innovation in the history of the world.

    I don't think we or the EU have forgotten this, I think the EU is a) trying to prevent it because the power currently resides outside their borders, and b) wants to come together in some serious economic challenge against a US-based firm to gain legitimacy in the eyes of the world as an economic force to be reckoned with.

    By Blogger Brian, at 2:13 PM, May 15, 2006  


  • Damn you, Greenberg, you made me go off and do research.

    Okay, looks like Adobe PDF is the same as Microsoft, in that it's still owned by Adobe but the license to build software around it is royalty-free. I have no idea whether Adobe's license is in any way revocable, so your argument that sauce for Microsoft is also sauce for Adobe has some merit.

    That being said, I can't believe you got less of an education into monopolies in Wharton than I got in Am Civ. Antitrust law is *based* on the theory that monopolies shut down the workings of a free market. Cf. steel towns and company stores, the AT&T breakup, and the decline of all Mac MP3 players after the release of iTunes. (Did the same thing happen on Windows?)

    What you wrote about legal proceedings and institutional exceptions (one could add Major League Baseball to the Amtrak mix) is precisely the way we prevent this dynamic from occurring.

    BTW, I'm not arguing with you that the EU isn't being largely silly on many specifics of these cases. But I agree with them on some of their points.

    By Anonymous jeff Porten, at 12:23 AM, May 18, 2006  


  • Unchecked or unnatural monopolies shut down the workings of a free market. Antitrust laws prevent these things from occurring. In many cases, though, our laws preserve monopolies, and for good reasons.

    Also, 90+% marketshare does not a monopoly make. You also need high barriers to entry, huge switching costs, etc.

    By Blogger Brian, at 5:59 PM, May 18, 2006  


  • Right. I am confident I'll be able to use my Netscape browser to view my PDFs for years to come.

    By Anonymous Jeff Porten, at 3:59 PM, May 21, 2006  


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