...get the Justice Department to break them up.
Nobody ever talks about the Microsoft monopoly anymore (well, except occasionally for EU and Korea). It's not because the legal action against the company had any real effect on the way the company does business, but because, with the rise of Google, et. al. there are now real competitors to the Redmond-based hegemony. Again, the rise of these competitors had nothing to do with the Justice Department, but because, in a capitalist system, it's really hard to sustain a monopoly, and eventually competitors, with brilliant products, will break through. It always seemed outrageous that the various digerati Sun, Novell, and other companies were among the chief backers of the Justice Department's action. But hey, this is America, and that's how jealous losers behave.
But is the story over, or is history doomed to repeat ourselves? Like our lessons not-learned in Vietnam, some think that we may, sooner than later, see the DOJ, engage in another costly traipse into trustbusting mode. Let's go waaaay back in internet history, over two weeks ago, before Google's earnings miss, when people still thought that Google was about to take over the world. Popular blogger, Steve Rubel, mused that Google's growing domination of every industry in the world would soon invite unwanted oversight:
In chapter eight John Battelle's incredible book, The Search, he astutely predicted that Google would increasingly fall under the watchful eye of the US government. As we saw earlier this month, John was right. The US government requested aggregate search data not only from Google, but from all of the major search engines. Only Google didn't comply.
Years from now we will remark that this was the beginning of the end of Google as we know it. The reason is one day - maybe sooner than we think - the government will try to break up Google. This may accelerate depending on the outcome of the 2008 election.
Whether DOJ would succeed here is entirely an open question. However, if this does indeed happen, it will certainly slow down the search giant and the Web economy overall, much as DOJ did for Microsoft and the PC economy.
Meanwhile, Google is starting to behave more like Microsoft did, with respect to PCs (wsj):
It takes only about five minutes to set up a new personal computer by clicking through a series of introductory screens. In that time, however, many consumers choose software and services they will often use for the life of their machine. Historically, Microsoft Corp. held great sway over this "first-boot sequence" as well as other software preinstalled in the factory.
Now PC makers including Hewlett-Packard Co. and Dell Inc. are beginning to take more control over this crucial real estate. They increasingly are trying to sell this space to service providers and software makers, such as Google Inc. After a year of sometimes tense negotiations with Google and PC makers, Microsoft has ceded ground on some key technical details.
In what would be the most significant example of this shift, Google is in serious negotiations to get its software installed on millions of Dell PCs before they are shipped to users, according to people familiar with the matter. Under the deal being discussed, Google, of Mountain View, Calif., could pay Dell fees approaching $1 billion over three years, these people estimate. The terms might change and the discussions could fail. Any agreement would be the latest in a series of similar deals with computer manufacturers the giant Internet search company has signed.
PC makers are turning their computers into the equivalent of a supermarket, capable of stocking products made by many companies -- for a price. The idea is similar to the way food companies pay grocers a fee to get space on store shelves and could help shift the balance of power in the software world.
Professor Larry Ribstein wonders the monopolist is here Google or Dell, also noting that before the DOJ went after Microsoft, it went after IBM:
Meanwhile, according to the WSJ, Google is negotiating for a big payment to Dell to, in effect, rent Dell’s “shelf space” in the form of its startup screen, which Dell controls by virtue of Microsoft not being able to. Microsoft is hoping for user freedom during the “magic time” of startup, and that the free users will choose the best products, which of course will be Microsoft's.
But if that doesn’t happen, I expect Microsoft to go to the Justice Department with the cry, “break up Dell” (or Google?).
Eventually it will occur to somebody that consumers are making choices and technology is evolving rapidly. Or not.
But why stop there? You could make a reasonable argument that Apple has a monopoly in the music business, as some are now doing. Myspace.com clearly has a monopoly in online teen social interaction (though of course Friendster once had that too). It's hard to imagine that the lawyers at the DOJ will ever one day decide to sit back, and let things unfold as they may, so many of the same folks arguing so hard against Microsoft, may soon find their own projects unfortunately 'disrupted'. I guess that's at least Justice.
It's funny, I remember people were once upset that Internet Explorer was given away for free, effectively killing off Netscape, but in retrospect, this must have been one of the most important moves in jumpstarting consumer use of the internet, right? Perhaps someone can correct my history.
Monopolies can provide real benefits. Things like the electric system and phone company could never have been built without high barriers to entry. I don't blame Apple for winning an 80% stake in the online music busines or Myspace for cleverly acheiving a dominant position in their markets, but I do take issue with how companies choose to exercise that power.
By controlling your music collection, Apple is making it an expensive proposition for consumers to accept alternatives to future version of the iPod. By locking down the format, they are ensuring that they will benefit from future upgrade cycles and are preventing better technologies from competiting with them. To me this is a problem.
My Space is also guilty of abuse. They censor their traffic from talking about youtube and instead try to steer their 50 million (and growing) users back into MySpace services. This censorship is troubling.
The question is what should you do when a monopoly abuses their power? Too often the answer is an excuse for Congress to create more pork. This doesn't help though, it typically makes the problem worse.
Your post does a good job of demonstrating that if we let the invisible hand freely work, that the market will naturally punish bad actors and reward innovators.
Posted by: davis freeberg | February 08, 2006 at 12:48 AM