Economy & Budget

Europe Plays Role of Software Company

Europe hit Microsoft with a new $357 million fine to compel the release of more source code, while Microsoft released new "operating principles" for software design, aimed at release of its new Vista operating platform. Microsoft says it will emphasize flexibility, easy interoperability, innovation, and market choice. So what’s new? Just government playing product developer.

Microsoft is accused of dominating the software universe using proprietary code and marketing tie-ins to beat other operating systems and competing add-on products. Bundling Internet Explorer into Windows was key to the European Commission’s antitrust complaint, and Microsoft dutifully unbundled. The result is a Euro-special version of Windows, sans browser, that no one actually wants.

Why should they? Having Explorer pre-installed on personal computers is a convenience for Microsoft and customers — nothing stops Windows users from installing another browser. In terms of competition theory, why is bundling fine for some products (cars don’t have to be sold with radios or navigation systems stripped out) but not others (preinstalled software).

Europe wants credit for Microsoft’s "new" operating principles. EC Competition Commissioner Neelie Kroes told Microsoft Europe expects Vista to be created “in line with the European competition laws. … It would be rather stupid to design something that is not.” But should Europe, hardly the leader in today’s high-tech economy, control the design of tomorrow’s software? Perhaps the inter-Europe alliance that created the Concorde, supersonic transport and market failure, should take on this new task.

Of course Microsoft weighs politics in designing and marketing products—why incur avoidable legal costs? But the world’s software leader re-engineers its platform for its consumers, not for Europe’s "competition policy." Exponential growth in the PC market and of Internet usage have transformed Microsoft’s consumer base: People want more options, more flexibility, and the power to create and explore new market niches. This new consumer demands products less top-down in terms of engineering, more responsive to individual users, and more customizable.

It’s interesting that this new market profile coincides with rhetorical flourishes from the EC, but to think the rhetoric actually drives the software market is like believing the sun rises because the rooster crows. Europe is a spectator in the software scene, skimming a little money off the top with its antitrust fines while pretending to "stand up" for European technological might. It’s a pleasant bit of theater, but don’t confuse it with the real world.

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