Carl Menger pointed out that producers of unique goods and services do not have arbitrary and unlimied “monopoly power.” Their actions are instead constrained by rivals and by consumers’ subjective preferences. The monopolist has only limited discretion which, if abused, can be frittered away.
An example is the worldwide frenzy for the 1.0 release of Firefox, the increasingly viable competitor of Microsoft’s Internet Explorer. IE’s market share, about 95% during the last several years, has been falling steadily since the beta version of Firefox was released. Apparently IE’s market dominance was due not to illegal tying or nefarious “network effects,” but to consumer preference, a preference that may be changing.
Servers are crashing everywhere from downloads but you can get yours here. A few people have noted that the setup page now rests on the Google domain.
So much for Microsoft’s much vaunted monopoly power!
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As someone who never used Internet Explorer willingly, I object to the tone of Peter G. Klien’s posting. But all in good spirits, let me ad.
Peter says, “increasingly viable competitor”, but this is not true in any sense except installed base. The other available browsers have always been technically superior.
The only reason that IE became popular is that it was “free” as in gratis while Netscape, who was the titan at the time, officially charged for their program. Netscape was always available free by FTP, for the geeks who knew where to look.
IE became pervasive because Microsoft included it in their operating system distribution by default, and in such a way that it could not be removed. Since people already have this browser, IE, the perceived utility of going and getting a different one was not enough to overcome the difficulty of doing so. (no matter how easy or useful it was in reality)
During this time, Netscape became gratis too, and eventually the source code was made “free” as in freedom, opened up and visible to anyone who wanted to make it better.
Because Mozilla, the “free” version of Netscape, took time to gestate, lots of other browsers have been developed as well. Opera has people singing its praises and runs on Windows, Linux, and other Unix variants. The Konqueror browser is a part of a full-featured desktop system for Unix variants called KDE, that anyone familiar with Windows might confuse for just another version of Microsoft’s OS, except it’s fast, efficient and uses open, published standards.
Firefox is simply the browser out of the Mozilla suite which has always included several other functions, like email and web page authoring.
What feeds the frenzy over Firefox is that the perceived utility gained over using Internet Explorer has become great enough to be noticed by a large number of people. The Computer Emergency Response Center has published reports informing people that IE should not be used because it cannot be trusted. It is insecure and unstable, easily corrupted by malicious persons.
Microsoft cannot keep the lid on it any more.
A year before Microsoft came out with IE, I was already running Netscape on Linux. Netscape, then Mozilla, has been part of every installation of Windows I have used since.
As Peter points out at the end, Microsoft never had a monopoly on browsers, nor operating systems. Everything is perception unless someone can initiate force, and Microsoft cannot force anyone to use their products.
…and that’s something I’ve very happy about.
Not entirely true – if you read the “finding of fact” in the antitrust trial, you will find memos where the integration of IE was specifically designed to give netscape users a “Jarring experience” – this from a MS memo. They made it so it could not be removed, and buried functions so that doing many things would bring up IE instead of Netscape. Now they require active X in IE to update Windows.
The main problem is it is almost impossible to buy a computer without windows, and Microsoft engages in what I would call fraud, since the EULA you must click through says you can return the software for a refund if you don’t want to use the preloaded windows. Ever try? They won’t refund just the cost of the OS (assuming they can compute it), but you may be able to send the entire computer back and with a restocking fee get some money back, but no computer.
I would have far less trouble with Microsoft if they would just honor their own license and give refunds themselves. Some have sued and won in small claims court.
Curt,
We have to remember that the term “good” does not describe a physical entity, but rather a consideration in the minds of individual men. It is man’s consideration that determines what is a good. MSIE bundled with MS Windows is a different and (to many people) better good than MSIE not bundled with MS Windows. To other people, it may be a worse good. The point is, the fact that MSIE was bundled with MS Windows apparently added to its value for many consumers. The lack of an free, easily obtainable, and widely known way to get Netscape probably contributed to its relative lack of success.
I’m glad that Firefox is doing well. It is what I am using, and is an excellent web-browser. Tabbed browsing is really a great feature, and its method of increasing font size (CTRL +) is great, because you can increase the font-size of any text that’s not a picture. It has other exceptional advantages over IE as well (superior compliance with standards).
Curt, I do not think we disagree, except here:
Peter says, “increasingly viable competitor”, but this is not true in any sense except installed base. The other available browsers have always been technically superior.
First, technical superiority is a matter of judgment. I personally found Netscape 6x inferior to IE5x, for example. Second, and more important, what matters in the marketplace is not technical superiority per se, but economic superiority — i.e., superiority in the mind of the typical consumer (not the geek). Whether Opera or Konqueror is “superior,” from an engineering point of view, is really beside the point. Betamax was presumably technically superior to VHS, just as the early MacOS was technically superior to its command-line competitors. But neither product was superior in the sense of being preferred by consumers, whose values may differ from those of engineers (e.g., favoring a low price over a greater feature set). Moreover, you dismiss installed base as an important criterion, but if consumers value the network effect, then the product with the greater installed base is the better product. The product that is free, and pre-installed, is the better product. The point is that absent success in the marketplace, there is no objective criterion for determining what product is “superior.”
tz,
Regarding it being almost impossible to buy a computer without Windows, that is completely untrue. It has been possible for years to buy a PC without Windows (indeed, even one that comes with GNU/Linux pre-installed), and can be done right now. You can even buy computers with Gentoo GNU/Linux pre-installed. You can also pay people to install Linux for you. Many distributions (Suse, Redhat, Mandrake, LibraNet, Lindows, etc) are now very easy to install. Even one of the most difficult ones to install (Gentoo) comes with excellent documentation for installing.
tz, I never said that Microsoft wasn’t a collection of idiots bordering on the criminal. I recall the motto “It’s not done till Netscape won’t run” very well. The only reason I didn’t go into Microsoft bashing is because the prosecution did a very good job of that as it was.
Peter, I think we are going to end up with nothing to actually disagree about. I also avoided Netscape 6, remaining at Netscape 4.2 until Mozilla came out, for exactly the reasons you give.
And David, I couldn’t agree more. Most cities large enough to be a city have had at least one “White Box” PC shop for many years. Just tell them you don’t want Windows, and Bingo! It’s the poor sods who think that Gateway, Dell and Compaq are the only way to buy a PC that are roped into buying a “one size fits many” package which includes Windows no matter what.
To bash Microsoft just a little, they have sole-source contracts with those packaged PC distributors which give them their Windows licenses at ridiculously low prices compared to “retail”, with the proviso that they have to include only Windows OS on the machines they sell (or hide the alternatives well). In a free market, they are more than welcome to negotiate any contract they want so long as they abide by it.
Microsoft’s refusal to abide the refund in their own license is what I want to see them prosecuted for, the “monopoly practices” is just hairsplitting nastiness.
One cute thing Microsoft did do was get an OK to pay their fines with SOFTWARE! That means, for their $.80 CD and license key, they get to write off $300 of their fine. And when the software comes up for updating, they get to charge for the update. So Microsoft is making money from being prosecuted for unfair business practices.
Unintended Consequences?
To connect this thread to Mr. Kinsella’s insightful thoughts on copyrights and patents:
The biggest reason, I believe, that Windows and IE were a monopoly for so long, is not because they were subjectively superior, and not because they were the customer’s first preference. Rather, the monopoly was fostered because no one was allowed alter and redistribute their own version of Windows (copyright law), and even making functionally identical and compatible software was legally dangerous (patent law).
Thus, if you wanted to operate software compatible with that of other PC users, you had to use Microsoft’s Windows by force of law.
Thankfully, the free (as in speech) software community has finally created competing products that have no corporate owners, so there’s no convenient target for Microsoft to sue. Sure, Gentoo Linux may violate Microsoft’s patent for “double-clicking icons”, but what is the Redmond Giant going to do?
I happily run a mixed office of Macs and Linux PCs. No need for Windows or IE here – there are too many superior options.
Ok, for the record: I laughed at the first version of MS-DOS in the 80′s, and since the web came along I’ve surfed with a succession of browsers from Lynx to Mosaic to Netscape to Opera to Mozilla right now (I’ve been waiting for Firefox 1.x before I make that switch).
Now back to the economic discussion: I agree with Paul that without interventionist IP laws there would be less monopolies emerging.
Having said that, I am convinced that the agenda of most large corporations these days is to keep the consumer public as stupid as possible to minimize their discoveries of alternatives. With a one-two punch of IP “rights” and marketing budgets, large companies like MS can obfuscate and bully almost as much as they want–and hence most people will never gain enough information to make a true libertarian choice about what is a “good.”
What I want to know is: What kinds of back-door OS holes did MS promise to the US government for backing off its case of “unfair” market share and bundling? What will the opportunity cost of choosing Windows/IE be for the millions of hapless citizens who had assumed they’d be able to surf with some semblance of online privacy?
OT, but how many here have heard about “Palladium?”
As far as it being impossible to purchase a computer without Windows:
Dell sells many computers — both desktops and servers — that do not come with Windows on them. Go to their small business website, and look at the “N series” machines.
So, not only is it possible to get computers without Windows, it is possible to get name-brand machines from (mostly) respected companies, and still be Windows free… if that is your wish… the N series are even a little cheaper most of the time to account for the lack of an expensive OS.
Not only is Firefox today’s #1 “killer app,” but mozilla.org accepts donations in sound money. I cannot point to an organization that is setting a finer example.
As a Macintosh user for 20 years, there has always been a choice for Windows users. If they choose not to take it then it is their loss.
I used NetScape for a while, but MS IE soon became the best browser on the Mac so I switched to IE. Then Apple released their Safari browser and I haven’t had to use IE for a couple years until this week. It’s been painful switching back to IE. At least it will only last until I get my Powerbook back from the shop.
- Hardy
I think this is a better example of the lack of monopoly power than either the original article or the comments are giving it credit for. This is one that we should continue to use.
Netscape, not IE was once the dominant browser in the world. It got there by virtue of being complete, ready and relatively easily available to the audience that already had access to the internet. It didn’t have 100% market share, but it was awfully close. The market was theirs to lose. And they did.
IE was not better than Netscape technically for the first few versions. In some ways, it was inferior. But it had one feature that Netscape lacked. Microsoft attempted to leverage its distribution channels for Windows to place IE on every Windows user’s desktop. It was easier to obtain than Netscape for Windows users, who were the majority of the desktop market and still are. But MS didn’t stop there. They priced it below cost, giving it away to achieve market share. They made it very difficult to switch default browsers. And they put pieces of IE into system libraries and used those from other programs so that you couldn’t safely remove IE. These are the kinds of actions that so many people believe a monopolist can use to exclude competition.
Well, Netscape never entirely died. It’s back with a vengence. Everything that economists have ever said about monopolistic tactics failing is true. If you sell below cost, your erstwhile competitors can force you to continue to lose money to hold the position. Because Microsoft bundled IE into Windows, users expect it to be maintained as part of Windows. They’ve built themselves a liability.
I integrate my own PCs so usually don’t have to worry about Windows. And I use a Mac for day to day tasks. Yes, you can purchase SOME PCs without windows – even from places like Dell, but it often isn’t easy.
Quoting Microsoft themselves about their logic bombs isn’t “bashing”. This is where I have a problem with what seems to be a libertarian “success=ethical” conclusion. If the IP and tort portions of the court system are broken, competetion cannot by definition be “fair”, nor “free”. The wielded gavel is one of the auctioneer, not the judge.
My point about the EULA speaks to this. If you won’t honor a contract on such issues, it would be cause for legal action. Microsoft absolutely refuses to honor the “refund” portion, but will call the constables out if you refuse to honor the “copying”.
But planting logic bombs and ignoring contractural requirements on their end are apparently just “competetion” to some.
Netscape/Moz/Firefox is coming back with a vengance only because IE is fundamentally broken. They can’t fix the standards violations or security holes easily, nor change the functionality as they have baked too much in. Because MS used their monopoly leverage instead of their technical leverage, they have difficulty moving forward. In essence, they are like Netscape 4-5 and are locked in trying to fix that. Mozilla abandoned the original codebase, and Firefox extracted the best of class and added features, so is now a generation ahead, but that (and the worm of the week) is what it took to get past the welded-in browser.
Having used just about every browser ever developed (with the exception of Mac’s Safari), I can confirm that IE overtook Netscape with each’s 4.0 release. Opera, meanwhile, has always had good features, but I’ve found it prone to crashes, and some pages, even if they are in standard HTML or XHTML just don’t look quite right with it. Mozilla, however, is a perfect example of diffused knowledge coming together. With its open-source model, it has gone from being a forgettable Netscape knock-off (the first version of Mozilla I installed) to the best browser I’ve used (starting with the last two pre-release versions of Firefox and now the 1.0 version). It also takes full advantage of third-party open-source add-ons, making them easy to install for almost anyone.
Microsoft has gotten where it has by threatening others for their patents and with government backing. Bill Gates used his former partners, and IBM, Linux, Apple Macintosh, so forth, without sole rights and/or consent to use their software/hardware. Bill Gates manipulated the code to produce his own software/hardware which in all Reality is theft, and we would be punished to the hilt by manipulating Microsoft’s and a variety of others’ codes and used it as our own. Our beloved Country as well as Bill Gates stages Terrorism such as donations to an Islamic Organization that had taken up residency within our own HOME.
Microsoft has gone World Wide which should be a sure sign of SPYware AKA. “Patriots Act” just as 911 was staged by our own Government to have an excuse to claim WAR against neighboring nations to cover up its own WRONG doings. How much does our Government participate in Microsoft, Enron, etc.?
Many are believing every single bit of the Propaganda and it’s reasonable to say why, because it’s shoved down our throats every single minute of Every Day and Microsoft has been following suit of Big Brother. Does Martial Law/Police State come to mind? Restrictions on the freedom of Speech, Freedom of the Press, Free Open Source, etc. We all know why? but decide to do nothing about it for the same reasons and one of the reasons is due to the same as Microsoft is doing to Fellow Corps. Money talks and BS walks. The Greediest Nation in the World. “Microsoft Windows Vista Power” Sounds like a Neo Nazi slogan
Microsoft has gotten where it has by threatening others for their patents and with government backing. Bill Gates used his former partners, and IBM, Linux, Apple Macintosh, so forth, without sole rights and/or consent to use their software/hardware. Bill Gates manipulated the code to produce his own software/hardware which in all Reality is theft, and we would be punished to the hilt by manipulating Microsoft’s and a variety of others’ codes and used it as our own. Our beloved Country as well as Bill Gates stages Terrorism such as donations to an Islamic Organization that had taken up residency within our own HOME.
Microsoft has gone World Wide which should be a sure sign of SPYware AKA. “Patriots Act” just as 911 was staged by our own Government to have an excuse to claim WAR against neighboring nations to cover up its own WRONG doings. How much does our Government participate in Microsoft, Enron, etc.?
Many are believing every single bit of the Propaganda and it’s reasonable to say why, because it’s shoved down our throats every single minute of Every Day and Microsoft has been following suit of Big Brother. Does Martial Law/Police State come to mind? Restrictions on the freedom of Speech, Freedom of the Press, Free Open Source, etc. We all know why? but decide to do nothing about it for the same reasons and one of the reasons is due to the same as Microsoft is doing to Fellow Corps. Money talks and BS walks. The Greediest Nation in the World. “Microsoft Windows Vista Power” Sounds like a Neo Nazi slogan
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