As noted at the beginning of this report, many of the monopolistic advantages enjoyed by Microsoft are due only partially to predatory abuses by the company; many of those advantages are results of the "network effects" to any dominant player in an area of technology where customers seek consistency and compatibility between converging technologies and connected markets.
Microsoft has used its dominance of the operating system standards--the "field of competition" in many ways--to gain an unfair monopolistic advantage against application competitors trying to compete on the standards controlled by Microsoft. It has used predatory pricing, including free giveaways of its software through bundling and Internet distribution, to overwhelm competitors who do not possess similarly deep pockets, and it has used exclusive licensing deals to completely cut off competitors from access to markets such as computer resellers tied to Microsoft through those exclusive deals.
For twenty years in the 1970s and 1980s, the federal government rigorously supported open technology standards and the end result was the innovative Internet. In recent years, the federal government has stepped back from that role as guardian of open standards and the result has been rapid monopolization by Microsoft. It is NetAction's position that the federal government must step back in to vigorously defend open standards and open competition, while carefully guarding against even the smallest abuses by Microsoft since even minor abuse by such a dominant player magnifies its advantages due to the network effects of the new economy.
In conclusion, NetAction offers the following recommendations as appropriate means of restraining the negative aspects of Microsoft's dominance:
Divestiture: At a minimum, Microsoft's Windows operating system monopoly should be split off into a separate company from the application and Internet divisions. This would end the inherent opportunities for abuse of one company competing in application markets while controlling the "field" of competition as well. It may also prove necessary to separate Microsoft's application and Internet divisions.
Restrain Predation: Stop Microsoft from giving away browser products. Since $0.00 is below any measure of cost, it meets the traditional test for predatory pricing (sustaining below cost pricing with monopoly profits in order to drive out competition and then raise price).
Licensing: Microsoft should be forced to discontinue any licensing practices (NT, database server, etc.) that restrict customer dealings with competitors or require customer use of MSFT products. Exclusive dealing and tying purchase of one product to purchase of another should be unlawful for this monopolist where linked to the operating system.
Open Standards: The government should more vigorously support open standards processes and endeavor to defend open standards developed through industry standards processes from anticompetitive abuse by Microsoft.
Consumer Involvement: The government must establish processes to ensure participation by Internet users in public policy decisions effecting consumer use of the Internet, including appropriate mechanisms for addressing complaints about product marketing and the quality and reliability of Internet services.
With these measures, we can begin restoring the promise of open standards and the dominance by the best available technology, not merely whatever technology furthers Microsoft's profits and strategic dominance.
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