A Rebuttal to ProComp’s Report on Technology | Citizens Against Government Waste

A Rebuttal to ProComp’s Report on Technology

Press Release

For Immediate ReleaseContact: Sean Rushton or Melissa Naudin
June 6, 2001(202) 467-5300


The Project to Promote Competition and Innovation in the Digital Age (ProComp), a trade association comprised of a few of Microsoft’s competitors including AOL Time-Warner, Sun and Oracle, recently released a report stating that Microsoft XP and the company’s whole .NET strategy are an attempt to monopolize the Internet.  ProComp claims Microsoft has  driven out competition and vastly increased its market share since the beginning of the U.S. v Microsoft case.  It also argues that Microsoft can now fix prices to extend and preserve its monopoly and “impose its reign upon consumers.”  Each “myth” comes from ProComp’s report.

XP is the latest version of Microsoft’s desktop software to be released in October 2001.  The .NET strategy is a new all-encompassing system, which allows developers to design Web-based services that consumers can use interchangeably on their PCs, personal digital assistants and other non-PC Internet devices.

þ  MYTH:  The .NET strategy gives Microsoft an opportunity to obtain an Internet monopoly.

þ  REALITY:  “Internet monopoly” is an oxymoron.  The very nature of the Internet makes it impossible for any one entity to control its content.  In fact, .NET is more likely to expand output and benefit consumers on the Internet than it is to restrict output or exclude competitors, who are well positioned to respond to Microsoft’s innovations with innovations of their own.  Sun and Oracle for example, have long-standing market positions which Microsoft’s .NET initiative could not credibly evaporate.

  • MYTH:  Microsoft has a dominant market share in operating systems, web browsers, and personal productivity applications (spread sheets, word processors, presentation graphics).

þ  REALITY:  As of January 2001, Netscape still held 40 percent of the browser market, with dozens of alternative browser options available.  In the same time period, AOL Time Warner’s deal with Microsoft ran out.  As a result, AOL Time Warner can easily make Netscape 6.0, which it purchased for $4.2 billion in March 1999, the dominant browser once again, by bundling it with the new AOL 7.0 coming out in the fall.

þ  MYTH:  Microsoft is “bundling” its products to create huge barriers to entry for competitors in the information technology industry.

  • REALITY:  Integration is a vital means of innovation and competition used by all manufacturers, not just Microsoft.  Sun Microsystems promotes its SunONE platform “for tasks and technologies that will reduce cost, risk, and complexity…”  Similarly, SyBase markets its applications as a package because “everything works better when…everything works together.”  Even AOL’s “Anywhere” strategy makes AOL services, brands and features available to consumers through multiple platforms and mobile devices.  Steve Banfield, general manager of RealNetworks’ consumer products, dismissed any threat Windows XP poses on the streaming media front.  “That Microsoft is bundling Windows Media Player in XP is pretty much a non-event.”  XP is intended as a total package, with the huge economies of scale this involves making it cheaper than purchasing the individual elements separately.

þ  MYTH:  Microsoft will not allow third party software vendors to place product icons on the Windows XP desktop or start menu, directly impacting the ability of third party applications developers to effectively distribute their products.

  • REALITY:  Windows and Office XP are designed as basic models with the option to add on more advanced applications if desired.  This time round however, the “basic model” has been expanded so that the average consumer is introduced to emerging media technologies and has the ability to establish a more complete knowledge of the applications.  People can use this as a jumping off point for higher level packages, which can easily be added onto the basic model.  Add-ons are even recommended in some cases, if a consumer wishes to pursue an area of interest further.  Because of this XP poses no threat at all to small businesses which produce similar software.  Some software companies say that being included in the operating system actually boosts sales and consumer choice as thousands of independent software developers take advantage of the new capabilities when developing their own software.
  •  MYTH:  Having Windows Media Player tied to XP will put other media players out of business.
  • REALITY:  By adding moviemaking and photo-editing features, small businesses are especially eager to take advantage of the new opportunities XP offers.  MGI, a Toronto-based company best known for its PhotoSuite image-editing and VideoWave movie making has seen its video business double since the introduction of these applications.  This creates an opportunity for new players to come into the market almost on an equal footing with more established companies.  Giving the little guy a foot up seems in stark contrast to the monopolistic claims currently being thrown at Microsoft.  Rob Glaser, CEO of RealNetworks, has also stated that he is not worried about Microsoft, as his company has created eight major versions of RealNetworks in the last five years and the number of users increased from 100 million to 170 million in 2000 alone.
  • MYTH:  The government and state attorneys general that are currently suing Microsoft should initiate a new lawsuit to prevent the company from launching .NET.
  • REALITY:  In regard to the current Microsoft lawsuit, the managing deputy attorney general of West Virginia recently wrote: “The case was initiated after complaints were made by Microsoft competitors which believed they had innovative products and creative ideas but were thwarted from marketing them because of Microsoft’s unlawful practices.”  The .NET complaints by Microsoft’s competitors sound ominously like another invitation for the government to bail them out.  CAGW estimates that to date, more than $35 million has been spent on the Microsoft case.  That case should not be dragged all the way to the Supreme Court by the litigation-prone state attorneys general, nor should they or the Justice Department initiate a new attack on high tech and by going after .NET.

CAGW is a nonpartisan, nonprofit organization, dedicated to eliminating waste, fraud, and abuse in government.

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