Daniel Eran Dilger
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EU Urged to Open Microsoft’s Monopoly Billions to Free Market Competition

Microsoft Monopoly
Daniel Eran Dilger
After the European Court of First Instance upheld its antitrust decision against Microsoft, professional Windows Enthusiasts all worked to spin Microsoft’s setback as bad news for Apple. They hoped and prayed Apple might be similarly restricted by the EU courts–but immediately, rather than after ten years of deliberation as was the case with Microsoft.

In reality, Apple would like nothing better than for the EU courts to reign in upon the music labels that carve up Europe into a complex landscape of territorial licensing and pricing, and force them to allow Apple to offer their music to Europeans from a single iTunes Store at a uniform price.

[Thoughts on Music – Apple]

Distracted by their malice toward Apple, these wags were likely unprepared to hear the latest recommendation from the Globalisation Institute in Brussels, which submitted a report to the European Commission outlining why the “bundling of Microsoft Windows with computers is not in the public interest, and prevents meaningful competition in the operating system market.”
[What’s next for EU competition policy?]
Unbundling Microsoft Windows (PDF) – Globalisation Institute]

Tear Down This Wall.
While Windows Enthusiasts love to suggest that Apple should be either forced to license Microsoft’s Windows Media DRM on the iPod, or at least should be forced to license its own FairPlay DRM to other online music stores and media players, the Globalisation Institute’s report turned that idea on its head by noting that PC makers shouldn’t be forced to license Windows for users who don’t want it.

Alex Singleton, the author of the report, noted that “cheaper competitors are unable to benefit from their lower cost because consumers have already been forced to buy Windows. Windows’ dominant position both has slowed technical improvements and prevented new alternatives entering from the marketplace.”

Neelie Kroes, the European Commissioner for Competition, earlier observed that “innovation in high technology markets” has come “largely in areas that Microsoft does not control.” The Commission’s existing case against Microsoft centered on the bundling of Windows Media Player with Windows on new PCs. However, Singleton’s report urged the Commission “to go to its logical conclusion and support the ‘unbundling’ of Windows from desktop computers.”

Component Computers.
Singleton noted that there are competitive markets that supply all of the hardware components inside PCs, from processors to memory chips and hard drives, adding, “there is no reason why there should not be diversity in operating systems, too.”

The report continued, “There is no meaningful competition between operating systems for commodity computers. Microsoft’s dominant position is not in the public interest. It limits the market and has slowed technical development to the prejudice of consumers.”

Rather than causing support problems for PC users, “competition would encourage open standards and interoperability as vendors would, for competitive reasons, want their products to interact with other vendors’ products.”

Recommended Solutions.
The report outlined various options for unbundling Windows from PC sales, including mandating that computer manufacturers always offer consumers a choice of bundled operating system, or that they be given the option for a refund. Both ideas were dismissed due to possible logistical problems or bureaucratic issues.

Instead, the group recommended that PCs simply be sold separately from an operating system, requiring that consumers buy their own. Since Microsoft already uses software activation in its Windows products, there would be no piracy issues for the company. That would give consumers a real choice in determining the cost and features of their operating system software.

“For two decades, Microsoft has enjoyed monopolistic power in the operating system market. We are calling for the European Commission to liberalise the market and let consumers benefit from cheaper prices, greater competition and more innovation,” Singleton concluded.

Opening the Stranglehold on PC Operating Systems.
The American monopoly case against Microsoft uncovered a similar pattern of evidence that Microsoft’s monopoly position in PC operating systems was harming consumers, inflating prices, and delaying or defeating technical progress by erecting barriers to competition. The US failed to act however.

A variety of states sued Microsoft over using its monopoly position to overcharge consumers for Windows and Office, but neither the federal nor state governments have acted to stop the ongoing abuse of Microsoft’s monopoly status in the US.

In contrast, the EU is demanding results in its antitrust case against Microsoft. Acting to unbundle Windows licensing from PC sales would have an immediate effect of revealing the true cost of Microsoft’s software while advertising the availability of much less expensive–or even free–alternatives.

The First Competitive Market in Desktop Computing.
Opening the PC operating system market to competition would also allow new vendors to compete, including Apple. Over the last twenty years, alternative commercial operating systems including NeXTSTEP, OS/2, BeOS, and the AmigaOS were all unable to penetrate the closed software market created by Microsoft through its exclusive contracts with PC makers.

Today, there are few alternatives for PC users apart from the free BSD and Linux; obtaining a PC with either system is difficult or impossible without also having to buy a bundled copy of Windows. By unbundling Windows from new PC sales, Apple and other new rivals would have an opportunity to sell their software to PC buyers at the time of purchase, not after the customer has already bought Windows by default.

Right now, the limited sales Apple could achieve in offering Mac OS X at retail would largely only eat into the company’s own hardware sales. Even Linux, which is available for free, has had a difficult time establishing any significant share of the PC desktop because the demand for PC software is monopolized by Microsoft’s exclusive agreements.
why os x is on the iPhone but not the PC
[Why OS X is on the iPhone, but not the PC]

$15,000,000,000 Up For Grabs.
Such a decisive move by the EU would crack open an equal opportunity to compete for revenues that are currently guaranteed to Microsoft. Exposed to real competition, the company would no longer be able to rake in 81% profit margins on sales of its half-decade old Windows XP software, as it reported doing last year.

Apple–along with IBM, Novell, and other companies supporting Linux–would be free to earn an completive share of the nearly $15 billion operating system market that Microsoft now controls. Existing products could immediately offer consumers better prices, better features, and better performance.

The distribution of all that money would rest with the purchasing decisions of businesses and consumers–a free market–rather than back room deals between Microsoft and a few big PC makers. Vendors offering better technology at a better price would be rewarded with more revenues to continue their development work, resulting in further advances.

No doubt the Windows Enthusiasts advocating that the courts take action against Apple and the European music labels to insist upon fair and free trade throughout the EU would similarly support plans to open up the decades long monopoly that has prevented users from being able to select an operating system when they buy PC hardware.

[Office Wars 2: Microsoft’s Outrageous Office Profits]
Office Wars 3: How Microsoft Got Its Office Monopoly]

[BBC’s Bill Thompson Prints Irresponsible Rubbish on Apple]
[Forbes Prints Insanely Self Serving Attack on iTunes by MediaNet CEO Alan McGlade]
Bill Thompson attacks iTunes

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