Why Is Windows So Cheap?
October 22, 1997
Nobody likes to criticize Microsoft more than I. I like to think that I even rival Gary Reback in my distaste for all things Redmondian. Needless to say, when I heard on Monday that the Justice Department was taking Microsoft to the mat, I was filled with glee. At last, the moment I'd waited for ... the big payback.
Then I looked a bit more closely at the case. Basically, the Justice Department is coming after Microsoft because they're requiring computer makers to bundle Internet Explorer 4.0 with Windows95. This gave me pause. Isn't it a good thing that every new computer will ship with a web browser installed? As a web developer, and a web believer on top of that, it excites me that people will have Web access right out of the box. As far as I'm concerned, it's an essential application for any computer user. While they're at it, I hope that Microsoft (and Apple) make it as easy as possible for new users to get dialup Internet connections as well.
As good as it is that people won't have to wait until their geek buddy can come over and help them out before they get on the Internet, I have to ask myself, "Where's the catch?" Microsoft gives away Internet Explorer, which I have no doubt cost more to develop than Netscape Communicator. For God's sake, they hired Steve Capps himself to help design the interface for the damn thing. They advertise it everywhere on the Web, and now they're requiring that all PC vendors who bundle Windows95 include it as well.
While people throughout the computer industry seem to be dwelling on the old saying, "Don't look a gift horse in the mouth," I prefer "There ain't no such thing as a free lunch." IE may not cost money, but there is a cost associated with it, and as it turns out the cost is pretty high. What's the price of adopting IE? Ceding control of the formerly open standards on which the Internet is based to Microsoft.
Bill Gates tells us to ask ourselves the question, "Why is Windows so cheap?" I think the answer is obvious. While he'd have you believe that all he cares about is making Windows developers rich and building a strong industry for PC makers, the simple truth is that Microsoft understands one thing. Controlling the platform guarantees continued success. There's really not a lot more to it than that.
Economists have a term for what Microsoft does. Rent seeking. Rent seeking is the money that monopolists spend in order to hold onto their monopoly. Examples of rent seeking include developing expensive software and giving it away, and paying to advertise free software. Another economic term that comes to mind is predatory pricing. When you sell something for less than it costs to make in order to wear down your competitors, you're using predatory pricing.
When I lived in rural Pennsylvania, there was an independent gas station on a corner near where I worked. Construction started on a shiny new gas station across the street, one that was owned by a chain. When the new gas station opened, they sold their gas for about 15 cents less per gallon than the one that was already there. The old gas station tried to match their prices, but after a couple of months, they just locked the doors. The next day, the new gas station started selling gas for the price the old gas station charged before the new one opened. Microsoft has at least seven billion dollars in the bank. Internet Explorer is a new gas station.
Look at Microsoft's position on Java. Frankly, I don't have any love for Sun, they just want to be a Microsoft, but nevertheless the way Microsoft has handled Java is just one example of their overall philosophy. They don't want to use RMI, which is a simple protocol that lets Java applications talk to each other. Instead they say, "Just use COM." Of course, COM is controlled by Microsoft and only works on Windows. So much for Write Once Run Anywhere, which may be a pipe dream, but pipe dreams are better than nothing.
So the question is, are you willing to turn the Web over to Microsoft? Right now, the Internet is a buyer's market. There's not much there in the way of lock-in. If I don't like Internet Explorer, I can use Netscape Navigator. If I change my mind tomorrow, I can switch back. It's not going to affect me much. As long as the Web is built on publicly defined standards, available without entering into partnerships, or signing licensing agreements, or walling yourself in with NDAs, we have the freedom to choose. If you don't like the software that's out there, write your own, all you have to do is look at the standards available right on the Web.
This whole escapade isn't about Microsoft's illegal coercion of PC makers (although that's certainly interesting, if not surprising). It's not about Microsoft's right to innnovate, or their right to decide what makes up their products. It's about power and control, and in the larger scheme of things, money. You may like Microsoft and their products today, but what if decide you don't like them tomorrow and there aren't any other choices?
The price for Internet Explorer is high. In my opinion, it's far too high to afford. Bundled or no, I don't really see how anyone who values the Internet the way it has been and the way it could continue to be can afford it either.
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