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Summary:

Matt Yglesias tries to argue that if antitrust authorities hadn’t stepped in, Microsoft would have prevented both Google and Apple from becoming as successful as they did — but this stretches credulity to the breaking point.

Not surprisingly, there’s been a lot written over the past few days about the upcoming retirement of Microsoft CEO Steve Ballmer and the impact his departure will have on the software giant, and also about his legacy, such as it is, and what he could have done differently. Some visions of this alternate future are more likely than others, but others are closer to being flat out wrong — like the version that Matt Yglesias tries to put forward in a piece at Slate, where he argues that the Justice Department’s prosecution of Microsoft saved us from a hideous future in which Apple and Google never existed.

Yglesias makes his point obvious in the headline of his piece, which is entitled “The Justice Department Was Absolutely Right to Go After Microsoft in the 1990s.” In a nutshell, the Slate writer argues that if the federal antitrust authorities hadn’t launched a case against the software company in 1998 and extracted a series of concessions from it during a long settlement process, we would be living in a very different world — one in which Microsoft us such an impervious monopoly that neither Apple nor Google are really able to build much of a business in search or mobile technology. For Yglesias, the lesson is:

“There was nothing foolish about the DOJ’s pursuit of a case against Microsoft, the settlement eventually reached with the company was perfectly reasonable, and what we’ve seen over the past decade or so is very possibly the benefits of that litigation — litigation that, in retrospect, has had no meaningful costs or downsides.”

No Google and no Apple iPhone?

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According to Yglesias, forcing Microsoft to dismantle the integration of Internet Explorer and the Windows operating system — one of the main targets of the government’s antitrust case — was the key to unlocking the potential of the internet, which in turn led to the rise of Google and that company’s dominance of web search and related services (somewhat confusingly, Yglesias also argues in a separate piece for Slate that we should thank Microsoft for blunting the impact of a potential Google monopoly). As he describes it:

“Had that not happened, it’s entirely possible that Microsoft could have used its dominance of the PC marketplace to substantially pre-empt the rise of Google. Imagine a world in which more than 90 percent of people have Microsoft computers that default to a Microsoft Web browser that defaults to a Microsoft-owned search engine. Google search is out there as a kind of niche product for serious nerds, but it never generates the kind of revenue flow necessary to move in to start dominating the webmail and map spaces.”

Not only that, but Microsoft’s monopoly over the internet — in Yglesias’s version of events — also winds up blunting the impact of Apple, and thereby effectively prevents the company from building on its success with the iPod to launch the iPhone and reinvent the entire mobile phone market. Says Yglesias:

“With Microsoft-owned Web services for search and mapping dominating the Internet and exclusively available to users of Windows Phone, it’s not possible for rival smartphones to ever go mainstream… The mobile revolution looks more like a slow inching forward, with cutting-edge technology rarely finding marketplace acceptance and market-leading technology rarely being genuinely the best stuff [and] app-based services find it harder to take off.”

Is it possible that what the Slate writer describes might have actually happened if there had been no Justice Department prosecution of Microsoft? Theoretically anything is possible — but for me at least, his vision of a Microsoft-led future stretches the bounds of credulity to the breaking point.

The web disrupted Microsoft, not the JD

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Why? Because even before the antitrust case was concluded and a settlement reached, it was already blindingly obvious that Microsoft had missed the potential of the internet completely. While it saw the browser as another piece of software it could tie into Windows and get people to use, it had no clue about the disruptive effects the web would have on virtually every aspect of the technology business over the subsequent decade, from search to advertising to mobile and personal web services. None of that even started to become obvious until Google came along, and even then it took awhile to sink in.

Internet Explorer was almost pathetically inadequate for a long time (although I am willing to admit that it did eventually get better), as were almost every single one of Microsoft’s attempts at web services such as MSN and all of its various related features, on which the company wasted untold billions of dollars. The web-ification of Office and other moves by the company eventually found a market with Windows users, but that also took years to accomplish.

The idea that the company could have built up this unassailable monopoly on the internet that would have ensured Google and Apple never became as dominant as they are in search or mobile borders on the ridiculous. And it also plays into a dangerously complacent view of antitrust investigations like the Microsoft one, which argues that if it wasn’t for the Justice Department swooping in to rescue us, we would have been condemned to a nasty future, trapped under the boot-heel of a monopolist, unable to save ourselves.

The reality is that in most cases, as in Microsoft’s, the disruptive effects of a changing technology environment have far more impact on dismantling a company’s monopoly control over a specific market than anything an antitrust regulator does. If Matt Yglesias wants to thank someone for crippling Microsoft, he should be thanking the internet — and the company’s own sclerotic management — not the Justice Department.

Post and thumbnail images courtesy of Flickr user Mark Strozier

  1. Every single mildly successful MS Internet product are because they are bundle into Windows: Messenger, IE, Skype, Bing and so on..

    So yeah, Maybe they need to start thinking on wining with quality products instead of shoving mediocre products into people’s window OS.

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    1. What really happened was some losers (*cough * Netscape, IBM, SUN *cough) decided the only way to turn the table was pulling the strings from the govt side. Back then MSFT was too cocky to care to play politics especially with the liberal far left communist branch like that of Clinton administration so they were caught off the guard. Later the more business friendly Bush govt came along to wipe out some of that Clinton era nonsense but the damage was already done to MSFT, which contributed to a decade of stagnation at MSFT.

      Apple’s success had nothing to do w/ DOJ intervention. If anything DOJ only gave some loser companies an undeserving breath that they still could not make it at the end (think of how bailing Detroit out worked).

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  2. So you seek to discredit a man’s view of what could have been without presenting your own basis for countering his. Splendid.

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  3. Let’s end this outrageous nonsense from both bloggers.

    Google obtained its monopoly on IE on Windows! Since Google.com launched, most of its monthly users have been on Windows.

    Would Apple have allowed Google to do this if Mac had ever scraped past 5% market share? More likely, Google would have had to pay to be default in Safari rather like they do in Firefox.

    The US government certainly did undermine Microsoft, as did the EU and others. But this happened because of self-serving lobbying — and cosy relationships between politicians and executives of both Apple and Google.

    The DoJ was not right, and it has not been vindicated.

    The previous author cited here reaches a false conclusion by distorting the facts. For example:

    “Imagine a world in which more than 90 percent of people have Microsoft computers that default to a Microsoft Web browser that defaults to a Microsoft-owned search engine. Google search is out there as a kind of niche product for serious nerd”

    Google became popular in IE on Windows!

    Long after Google had established its monopoly in search, Bing was launched; indeed it can be understood as a response to a decade of attacks by Google’s against Microsoft. Notice that the only dangerous and anti-competitive monopoly in the real story is Google.

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  4. It seems people are confusing what caused the DoJ action with today’s market situation. The regulatory action against Microsoft was explicitly about using the Windows monopoly on PCs to 1) protect that monopoly (e.g. forbidding PC OEMs from shipping non-Windows PCs) and 2) leveraging the Windows monopoly to bundle its own products AND excluding others. In the end, the problem was more than the damage was pretty much already done. It was the proverbial closing of the barn door after the horses had left the barn.

    To confuse the consent decree and what it was intended to address with the overall technology market changes (commoditization of new software-based services and a huge migration to mobility-oriented usage situations where PCs aren’t the best solution) is actually rather silly.

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  5. If anything the DoJ let Microsoft get way bigger than they ever should have gotten. Bill Gates was as ruthless as he was smart.

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