With mergers and company failures regularly in the news, the amount of healthy competition in the technology world is clearly decreasing. This, of course, means that more companies will gain a monopoly in their markets.
This got me thinking about monopolies in general and the companies that are typically seen as monopolists in the technology arena. Just which tech companies are true monopolists, and which ones fall short of being a monopoly?
My dictionary defines a monopoly as “exclusive ownership through legal privilege, command of supply, or concerted action, exclusive possession or control, a commodity controlled by one party, one that has a monopoly.”
OK, so that wasn’t much help. Wikipedia has a longer definition that, to me, hinges on two points: One is that a monopoly exists when “a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.” The other point is that a monopoly process occurs when “a firm gains persistently greater market share than what is expected under perfect competition.”
So, with these definitions in mind, let’s look at some tech monopolies.
Say the words “monopoly” and “software,” and the first company that will spring to mind is Microsoft. But by most of the definitions I provided above, Microsoft barely qualifies.
In almost all of its product categories, Microsoft faces competition–in many cases, serious competition. It’s hard to come up with any area in which the company “determine[s] significantly the terms on which other individuals shall have access to” a type of product.
Microsoft’s biggest perceived monopolies are probably in office applications and corporate mail, but, of course, any user or company can choose other products in those categories.
Now, if one uses the definition of a firm that has more market share than what is expected under perfect competition, Microsoft fits a lot better. But, in my opinion, Microsoft isn’t really much of a monopolist. On a scale of 1 to 10, with 10 being a full-on/no-competition monopoly, I’d have to give Microsoft a 6.
There are other companies that probably would come in as 7s or 8s on the monopoly scale. These would include Intel–which really has only one competitor and certainly affects the terms on which people have access to processors–and Cisco, which has a similar impact on the world of networking equipment.
Clearly coming in as an 8 on the monopoly scale would be Google. Sure, it has competition in search and in many of its Web 2.0 hosted application offerings. But when it comes to online advertising and search optimization, there is one company and only one company. Businesses big and small kowtow to the throne of Google to improve their search rankings and increase the likelihood that people will find them online.
But one of the biggest technology monopolists is a company that I think would get a 9 on the scale: Apple. In the world of Apple products, no one holds tighter control, or acts in more monopolistic ways, than Apple (and, for the record, this column is being written on a Mac).
For the vast majority of Apple users, saying that Windows PCs are an option is sort of like saying that the steak and ribs on the restaurant menu are an option for vegetarians.
In the Apple universe, competition is pretty much non-existent. There’s only one hardware provider, and Apple pretty much dominates the software side as well, with the third-party vendors playing by very strict rules. These rules are even tighter on the iPhone side, where the restrictions of the iPhone App Store keep lots of applications on the outside.
Loyal Apple users get it even worse. Features and capabilities are removed, with no recourse for users wanting new hardware. (“Need Firewire for that cool new equipment you bought? Outside of our cheapest MacBook, tough.”) And true customization and flexibility are hard to find in most Apple products. (You’ll be fine if you use Apple products the way Apple says to–it knows best.)
Interestingly enough, Apple users are mostly very happy with this situation. Maybe it’s true that people are happiest when controlled with an authoritarian hand. And we’ll see where the new monopolies being formed today fall on the monopoly scale.