It was only a matter of time before I had to pipe up about this.  I currently work for Microsoft, so I have seen things from the inside.  I also recently saw the government screw me out of any chances of retirement without government assistance, since it managed to tank the entire technology market in recent weeks.  These two facts mean that if you're looking for an unbiased opinion on what Microsoft has done and what the government can do to correct it then you've come to the wrong place.  Nor will I denounce Microsoft as a greedy monopolist.  Greed is a human characteristic, and anyone who thinks you can combine 20,000 greedy people under one roof and make a utopian society that is free from greed is naïve.  Very naïve.  Every company is greedy.  The trick is to take that greedy energy and harness it to create great products.  What I want to rant about here are some "facts" that I have read in various papers.  These tidbits of information have been called facts, but are in fact opinions of various economists.  Economists are people that know a lot about business, but not so much that they could actually go into business for themselves and earn money.  Oh, and remember, before I really dig in here, that these are my own twisted little views and not Microsoft's.  

Fact One

Obviously Microsoft cheated to get its market dominance.  The market always chooses the best products, and there are other superior offerings to Microsoft's operating system out there that lost.  Therefore, Microsoft must have done something early on to cheat its way into the dominant position.  

I read this in last week's Time.  In a perfect world, this economist is right:  the best technology wins.  However, there are a lot of ways to define "best".  From a purely computer science perspective, the "best" software is software that is written in the most efficient way, is totally bug-free, and as performant as possible.  Best to a consumer, however, is whatever is the most readily available and gets the job done reliably for the least amount of money.  It doesn't have to be coded in 100% assembly language.  It has to be reasonably easy to use, can't cost a fortune, and, most importantly, must solve a customer's problem.  Does anyone remember the VHS vs. Betamax wars?  VHS won even though the Beta standard was a much smaller tape with higher quality.  VHS won because it was just plain good enough for most folks, and it was available and cheap.

Back in the good old days when IBM first created the personal computer, the Macintosh was far superior technology.  It was too slow to be useful and didn't have any applications for it, however.  The nasty character mode black and white screen that came with the IBM computer worked wonderfully fast on the hardware of the day.  Lotus 123 became required software within any business that couldn't afford a mainframe, and it only ran on the IBM PC.  Nobody cared that it wasn't pretty.  It was a tool, and it was a good tool.  By the way, nobody raked Lotus over the coals for not porting 123 to the Mac.

Was MS-DOS better than the Mac OS?  Was the IBM hardware a better design that the Mac?  No way.  To this day DOS it is my least-favorite operating system and the ISA bus and crappy serial ports of legacy IBM hardware designs still plague me.  So, what was it?  Well, it was IBM when they threw the designs out into the public and decreed that the PC was a toy and anyone was free and clear to make their own.  Prices went through the floor while capabilities rapidly increased.  Apple could not compete with the thousands of companies that were all working on improving the same design.  Microsoft just happened to be riding the same bus.

Today Windows 98 is the dominant OS.  Linux, BeOS and NextStep are all superior to Windows 98 in terms of technology.  But, Windows 98 is "good enough" for most people.  It's the same reason why people don't all buy BMW's and Mercedes.  Honda and Toyota are quite good enough for their needs.

Fact Two

What a horrible deed Microsoft did when they bundled Internet Explorer into the OS.  Here is a prime example of Microsoft using it's monopoly muscle to grow their browser market share.  They should be damned.

For anyone who takes this argument seriously, I have two questions.  First, have you ever looked, even for a minute, at any other operating system on the planet?  And second, have you looked at the history of operating system evolution at all over the last thirty years?  MacOS.  NextStep.  Linux.  Solaris.  OS/2.  BeOS.  They all have built-in web browsers, and I just thought of those off the top of my head.  So how is it that it's OK for these operating systems to have a web-browser built-in but it isn't OK for Microsoft to add one to their own OS?  Nobody complained when Windows 95 shipped and it had a crappy web browser built-in.  They only started complaining when IE's technology started to become competitive with Netscape's.

Remember when cars came with really crappy radios and to get any quality sound you had to buy a custom radio?  Some people still do this, but most cars now come with sound systems that are good enough for avid music fans to leave alone.  Is this illegal?  Are stereo manufacturers suing car companies over lost revenue?  No.  Instead, they're making better car stereos to tempt people to upgrade.  Some people really into great sound take the plunge, exactly the way that some people replace IE with Navigator or the Windows Media Player with WinAmp.  For the rest of the world that just wants things to work, they have a decent option built-in. 

Now, on to operating system evolution.  A long long time ago, when Windows 3.0 first came out, Windows didn't have scaleable fonts.  In other words, when you printed something, if it wasn't in 12, 16, or 24 point type it looked all blocky and gross.  OS/2 and Unix had beautiful postscript fonts that would scale to any size you wanted.  To fill this void there were a handful of companies that made scaleable font packages for Windows.  I bought one and it cost me $70.00: more than Windows itself.  To me, it was worth it because I could print college papers that looked great.  Microsoft added scaleable fonts to Windows in version 3.1.  Was that illegal?  Did it put all those companies that offered font packages out of business?  Nope.  They went on to create products that filled other holes in Windows.  Some took the same route as Netscape and built better and faster font engines to replace the one that came with Windows.  This is how software evolution works.  A company creates a product to fill a need.  If that product is deemed important enough that everyone needs it, then it generally gets rolled into common system software so everyone benefits.  The end result is that common users of computers do not have to buy several packages from many different companies.  What would happen if my mom, who is not a computer expert, had to buy separate programs for each component in her computer?  Would she head over to the local computer store and buy a TCP/IP stack, modem dialer, email program, newsgroup reader, disk file system, print controller, font rasterizer and web browser?  No, she wouldn't.  She wouldn't own a computer at all if it needed to be customized to this level to do rudimentary tasks.

Fact Three

Unless something is done to restrict Microsoft's power it will continue to take over new markets and kill competition.

Yea, like Microsoft has already become the dominant player in internet technologies, server operating systems, and handheld devices, right?  When did Palm, Sun, AOL, Oracle and Cisco go out of business?  What you're running on the desktop is becoming increasingly irrelevant as the computing power moves from client to server.  The future of computing will involve myriads of hand-held devices all exchanging information with each other and with central servers.  To be competitive a company will need to make their products work with other companies products because connectivity is key.  This will prevent any one company from becoming dominant like Microsoft is now.  If it must be said that Microsoft has monopoly power in desktop software, it must also be said that the value of that monopoly is decreasing.  Microsoft essentially has a monopoly in a product that is becoming less relevant.  If I am the only company making spring-loaded back scratchers, and I have exactly five customers, do I have a monopoly?  Sure, but does anyone care?  This is an over-exaggeration of  the current position of PC operating systems, for sure, but what about five years from now?  That's how long the current court case will probably take to resolve.  In five years the "home computer" will be much closer to becoming the central basis for the home entertainment system.  The only software that you will run on this computer will be mail, web browsing, personal scheduling and games.  The data for these programs will probably be contained on centralized servers with local caching for speed.  Your operating system won't matter much, because data will be exchangeable between different systems.  Some people will be running Linux, some Whistler, and some will probably be running some souped-up variant of a game console.  The choice of system that people make will be based on the capabilities of that system and its ease of use relative to the technical knowledge of the people who buy it.  Don't believe me?  It's already happening.  Lots of people use Linux instead of Windows.  The government doesn't think Linux is a viable replacement for Windows because it doesn't have many applications that do word processing or spreadsheets.  That's not true for most home users.  I have Office 2000 on my computer, and I don't think I've ever started Excel.  I use email and the web, and Linux ships with this software built-in.  Computers are becoming defined as a communications device like the telephone. All operating systems will have to communicate using standard protocols for them to be useful and it will be virtually impossible to have a monopoly in anything. 

Fact Four

Microsoft charges a monopoly price for its Windows operating system.

Whoever can say this with a straight face has spent little time in the computer industry.  When I was in college I was an anti-Microsoft zealot because Windows didn't offer the power I wanted.  Solaris was available for my computer at the low low price of $2995, provided that I didn't want printed manuals.  NextStep was $495 and OS/2 was $250.  Windows cost the heavy monopoly price of $50 on upgrade.  Guess which I chose?  I actually chose OS/2 for a long time but scrapped it because of instability and lack of features.  Windows 3.1, a DOS relic, was much more feature rich than IBM's "newest" technology.

Ten years later Windows costs $89 to upgrade.  Definitely a monopoly if they can charge that price right?  Honda must be a monopoly too, then, because ten years ago a new Prelude went for $13,000 and today it is almost $30,000.  But wait, Linux is only $50, or free if you want to cobble together an installation from the internet.  That's a bargain!  Yes, it is.  Linux also has half the free world writing software for it out of the kindness of their hearts.  That's an ultra-cool anti-capitalism model that works to a point.  Eventually, somebody needs to get paid unless the entire Linux community is off on a ranch somewhere in Montana with their own ecosystem.  Companies like Microsoft pay their programmers, and that money must be recouped by selling software.  Software is very cheap to publish, but expensive to create.  Windows has over 2,000 people working on it.  Overkill?  Maybe, but remember that Windows ships with a separate driver file for thousands of printers, video cards, hard disk systems and other hardware.  Support for this vast array of hardware must be written by hand.  If you really want to know why the price of Windows has gone up, just look at the salaries of computer programmers.  Silicon Valley has been increasing salaries for years to try to retain top talent, and any company that wants to remain competitive must follow suit.  Microsoft is no different, and the net result is that the price of software increases.  It's called inflation, and it's an unfortunate side-effect of the US economy.

Summary

What should the government do? Nuttin.  From my chair the market is taking care of itself.  Microsoft is not the dominant player in home entertainment, handheld devices, or server software.  These are the areas of growth in the computer industry for the foreseeable future.  Any monopoly Microsoft held in operating operating systems is being dismantled as the market evolves past client PCs.  It won't happen immediately, but it definitely will happen.  The catch up position that Microsoft is currently in is good for a lot of people.  Microsoft can't play asshole in this position because it has few bargaining chips.  It can't force software on people that is buggy (Win CE 2.0 comes to mind here -- Palm is still kicking its butt).  No, the only way Microsoft will succeed in the future is if it gets back to its roots and makes really good, easy to use software that solves relevant problems.  Anything else is a waste of time and resources.

But shouldn't Microsoft be punished for the harm it has already caused consumers?  Well, let's turn this statement around.  Let's say that Microsoft folded early on in its lifetime.  Where would we be?  Would we all be using IBM PC's  running OS/2?  Nope.  IBM thought the PC was a toy and it would always play second fiddle to its minicomputer market.  If IBM was holding all of the software cards the PC would have folded.  How about Mac?  It's likely that Apple's Macintosh would have become a dominant machine for the few that could afford it.  The lack of any competition for Apple combined with the more complex hardware of the Mac would ensure that PC prices would be very expensive today.  So, instead of punishing Microsoft for consumer harm, how should we reward them for the good they have done to consumers?  What, you don't buy the argument when it is presented the other way?  You say that there's no proof that Macs would cost a ton or that IBM would tank the PC early in its lifetime?  Well, you're right.  There's no evidence that supports this.  Nor is there any evidence that consumers are worse off due to Microsoft.  There's lots of evidence that competitors are worse off, but that's called the survival of the fittest and is at the core of how capitalism works.  Yea team.