The bright side of monopoly

I've long argued that Microsoft has engaged in illegal, predatory behaviour to further its already immense market power. Although other companies surely have behaved similarly, Microsoft has been unwilling to admit that monopolists have to play by different rules. Risking its very credibility, the company even has denied that it has a monopoly. The US Department of Justice was right to intervene.

That said, it would be a great mistake to demonise Microsoft and distort its impact on our industry. Only through some deliberate blindness can we fail to see that the more powerful Microsoft has become, the faster the IT industry has grown. Now that the Justice Department is on the offensive, it's more important than ever to recognise Microsoft's many critical contributions.

Typically, those contributions have been described in historical terms. Before the PC, pretty much every hardware vendor had its own proprietary operating system. Whether the market was mainframes, minicomputers, Unix supermicros or technical workstations, frustratingly incompatible systems proliferated. First with DOS, then with Windows and now with NT, Microsoft singlehandedly ended that wasteful tradition.

The impact on overall industry growth is almost impossible to overestimate. In Japan, a true PC standard didn't emerge until the early 1990s, and the Japanese IT industry - and even the Japanese economy itself - still suffer the aftereffects. In the US, Microsoft's commitment to low-price, high-volume software is deeper and more authentic than its largest competitors'.

Even today, it's hard to make the case that Microsoft's gains have been a net loss for the IT industry. Although competition in a number of areas has been largely eliminated, the energies of the market have moved elsewhere and flourished.

The World Wide Web represents perhaps the greatest spontaneous outburst of technology in history. That this could happen without Microsoft's investment or even knowledge remains remarkable. Although software vendors in the messaging, database and utilities businesses often feel squeezed, those in the application space see nothing but green fields. To SAP, Baan and PeopleSoft, NT provides the foundation needed to build the integrated enterprise of the future.

That application creativity is about to accelerate dramatically. The Web, intranets and extranets will enable an ever-greater share of business activity to be managed by software and conducted over networks. Freed from worries about underlying platforms, software entrepreneurs are creating a whole new class of horizontal applications for customer service, purchasing, human resources management, direct marketing and so on.

How can an overwhelmingly powerful Microsoft monopoly and an evermore dynamic software industry happily coexist? The answer lies in the fact that monopolies are most harmful when the potential range of value creation is inherently limited.

In the case of software, nothing could be farther from the truth. There's so much work to be done that talented companies and entrepreneurs still have more opportunities than ever.

Does that mean the US government should simply butt out? Not at all. Valid laws always should be energetically enforced.

Moreover, at some point, the downside of an unfathomably wealthy and highly aggressive monopoly inevitably will begin to outweigh the benefits. The art of public policy is to intervene before that happens. That is pretty much where we are today. Perhaps things are as they should be.

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David Moschella

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