A fine for $810 million sounds like a lot of money. That is what Microsoft was fined for anti-competitive conduct. The fine by the European Commission was upheld this week by the European Court of First Instance.
There have been lots of oohs and aahs, particularly in the US, over the fine, but it is pretty paltry amount compared to the massive and richly undeserved profits Microsoft has made from the misuse of its monopoly position. Microsoft’s profits are about $15 billion a year.
Comparatively, it is the equivalent of an average Australian worker being fined $3000 – little more than a severe traffic fine.
Microsoft supplies about 95 per cent of the operating systems on the world’s personal computers – both in the home and office. When you buy a computer it will almost invariably have the Microsoft Windows operating system.
Microsoft also sells application software, for word processing, spreadsheets, data processing, presentations, video viewing and internet browsing.
It has misused its position as monopolist operating system supplier to fend off competition in the market for application software in several ways.
First it refused to give information about its operating system source code to developers of application software so that the competitor’s software can run well. Secondly, it has used an unusual but effective strategy to deny developers of new software market share. It has created software that does a similar thing to competitors’ software and then given it away with the operating system so no-one wants to buy the competitors’ software (even if it is superior).
Microsoft almost killed off Netscape as a seller of internet browser software by giving away Microsoft Internet Explorer. It virtually killed off several sellers of word-processing software by providing basic word processing free.
In the European case developers of video-viewing software faced a similar fate.
The third misuse of monopoly is the most pernicious. Microsoft’s power comes not because its software is innovative or excellent. It is not. Rather it comes because virtually everyone uses it. People use it at work so they buy it for their home computers. This is now true of the operating system as well as the Office group of software that does word-processing, spreadsheets and presentations.
If you create a file (an ordinary typed document, a slide show presentation or an accounting spreadsheet) in Office it can only be read by a computer that also has Office. These files cannot be read by other software. People are virtually blackmailed in having Microsoft because everyone else has it and no other software developer can get much of a look in. It has stifled innovation.
Moreover, Microsoft’s operating system is crafted in a way that will not allow application software to sit on it discretely. Application software has to be intertwined with the operating system. In this way Microsoft can make life awkward for non-Microsoft applications. But it also tends to slow everything down; make software harder to load; cause applications to shut down without warning; cause crashes and make back-ups and recovery far more difficult than they should be.
It gets worse, every time Microsoft brings out a new version of software, the older versions will not read files created by the new version. Out of sheer blackmail and frustration people are pressured into upgrading their software at great cost, even though the older version does the job. They get sick of receiving files they cannot read. It is happening again with the new Vista software.
The upshot is the Microsoft can charge hundreds of dollars for software that comes on a CD in a pretty box that costs about $1.50 to produce. You wonder who the pirates are here.
On that score, Microsoft, along with all computer software companies, have had it too easy. The courts very stupidly gave them copyright protection for their software. Copyright protection was designed for the written word, music and art, so it was granted for a long time – 50 years (recently increased to 70 years at the behest of the Americans). After 50 years the written word (say, a Dickens novel) had some public value when it came out of copyright into the public domain.
Inventions and contraptions, on the other hand, which is where software should sit, got patent protection for just 14 years (now 20 years), so there would be some public benefit when the patent ran out.
This was the reasonable aim of the law ever since the Statute of Monopolies in 1623 – intellectual effort was rewarded with an initial monopoly protection followed by a public benefit.
But there will be no public value in software after 70 years. These computer companies expect the courts and police to enforce copyright at public expense with no public benefit later.
If governments had any guts they would change the law so software came into the public domain after, say, 14 years, when it still had some use.
That’s what happened with the invention of the typewriter.
Imagine if, in the early part of last century, you had to have a special Remington reader to read anything produced by a Remington typewriter. It would not have been tolerated. Nor should we tolerate it now.
The Europeans have at least had a crack at dealing with Microsoft’s monopoly even if it was only a slap over the wrist – a fine of three weeks’ profit – compared to all the damage and rip-off done.
But really it will require some people power because governments do not seem to be effective. It is probably too costly and difficult for many people to start again with Apple or Linux, but we can at least start by preferring non-Microsoft application software wherever possible – a lot of it is free or much cheaper on the net, anyway.
More importantly, people should save document files in a format that can be read by any word processor. It is called rich-text format, or RTF and it keeps all the attributes (font, margins, indents etc) that most people need.
And do not give in to paying needlessly for software upgrades, particularly Office. The upgrades give you precious little extra for the money and indeed give you grief because you have to learn a whole lot of new tricks and the stuff you create won’t be able to be read by people with older software – unless you use RTF.
Otherwise, the vast mass of people will remain in the tentacles of Microsoft – to the detriment of efficient, competitive and cheaper computing – indefinitely. A few $810 million fines will have little or no effect.