Does This Change Mark a Beginning?

No one would argue that Microsoft's newly announced concessions to computer makers mark an end to the monopolist threat posed by the Windows operating system.

No one would argue that Microsofts newly announced concessions to computer makers mark an end to the monopolist threat posed by the Windows operating system. But critics who insisted last week that the concessions were nothing more than a cosmetic change in the companys policy clearly dont understand their full implications. Microsoft has not only changed the rules for computer makers; it has conceded a fundamental tenet of the governments case — that its own right to innovate does not supersede the rights of consumers to benefit from true competition.

The only question now is whether Microsoft will apply the same principles to new features in Windows XP. Critics are right in asserting that the concessions come far too late to enable competition in the browser market. But thats beside the point. If Microsoft is now conceding that compliance with the appeals court decision requires that the Internet Explorer browser be a removable application, rather than an irremovable component of the OS, it only stands to reason that the same principle would apply to its Windows Media Player and its instant messaging software — two currently stand-alone applications the company has announced it will incorporate into XP.

To my way of thinking, what Microsoft has conceded, in effect, is that while it still considers the browser a fundamental component of Windows, at least some OS components can be modular. That is, the Netscape browser could be as legitimate a component of Windows as Internet Explorer is. And one has to presume that this logic would extend to AOLs Instant Messenger and RealNetworks RealPlayer. Microsoft no doubt will deny the view that Windows is evolving into a modular product for which other developers can create competing modules, but that is clearly the impact of the concessions.

This is a huge win for consumers. Were now guaranteed that our computers will be shipped with at least one browser and probably multiple instant-messaging applications and multimedia players. Whats more, it will be Compaq Computer, Dell Computer, Hewlett Packard, IBM and a host of other manufacturers — not Microsoft — that will determine which and how many such applications/modules appear on my desktop when I boot. Even more important — assuming, again, that Microsoft applies the same concessions to Windows 2000 and its successors — IT departments will be able to contract with computer makers to purchase customized machines that arrive more precisely preconfigured for the needs of individual enterprises.

Does Microsoft still have a huge advantage in the market for any product it decides to incorporate into the OS? Absolutely! Its browser, instant messenger and multimedia player — and eventually, no doubt, security software and the entire .Net development — will become the default engines in each of their respective categories. Whats more, Microsoft is responding to a legal mandate, not some moral epiphany. It will no doubt invent plenty of tricks for leveraging its Windows monopoly in other, hopefully legal ways.

But so what? Getting to set defaults is a major earned benefit that accrues to Microsofts success with Windows. As long as there is a real opportunity for real competition, the playing field is legally level.

Microsofts most strident critics will never buy that argument, of course. They point to Microsofts ability to ship its browser for free as an unfair tactic that won the browser wars. Thats a moot point with the consumer version of XP, since individuals can already download free versions of RealPlayer and AIM. Its a far larger issue with the business versions, because enterprises must license both products.

But it clearly wont ever be illegal for Microsoft to add free components to Windows, because the appeals court made it clear that the test in determining illegal tying is not whether it hurts competitors, but whether it hurts consumers. Its never going to be easy to argue that giving something away harms the guy on the receiving end.