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On monopoly & competition in technology

2004 July 8
by Skip Sauer

Robert Bork and Tom Hazlett both get significant market shares in my antitrust class. But when it comes to thinking about technology, Hazlett trumps Bork, big time. Here’s a snip from Tom’s latest piece at FT.com.

The massive antitrust case launched against Microsoft on May 18 1998 ended last week with a whimper. A federal appeals court has endorsed a settlement reached between the software company and the US Department of Justice. Six years of legal dispute, including a government victory on some important charges, have ended. Microsoft, yet in one piece, continues to dominate market share with Internet Explorer (having vanquished its browser rival, Netscape), with its Windows PC operating system (even as Linux continues to generate buzz and Apple refuses to die) and with its now standard office software programs Word (word processing), Excel (spread sheets) and Power Point (3 million MBAs can?t be wrong). Robert Bork, representing anti-Microsoft interests challenging the settlement in court, was disgusted with the result: “It appears on first reading that Microsoft has been cleared to continue its campaign of predation”

So this is where Google comes in. Despite the fact that Microsoft and Yahoo are both moving aggressively to attack this space, Google?s search engine has performed brilliantly. Without the leverage of incumbency, the outsider has offered consumers value. Consumers have flocked to the innovative application; Wall Street now rushes to fund expansion. While in the cross-hairs of Microsoft’s “campaign of predation”, Google has developed a business plan that will soon be capitalised at something like $25 billion.

Make no mistake: Google strives to dominate. It aims to offer technology so compelling that rivals do not just lose market share, they lose the market. The incentive to seize and occupy a position of monopoly is what drove Microsoft frantically to develop highly functional browserware, distributdistributing it to millions of Windows users free of charge so as to fend off the tempestuous Netscape. It is what fuelled Google’s invention of a superior search engine, and it is what now drives it to offer a spectacularly more generous e-mail service. This is the productive violence of creative destruction, and its awesome power is only faintly hinted at by inbox notices announcing memory windfalls of 12,400 per cent.

In short, competition for the field, not just within it, is good for consumers. RTWT.

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