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Microsoft Anti-Trust LitigationThe Case for Standards

Ken KrechmerFellow, 2003

International Center for Standards ResearchUniversity of Colorado at Boulder

krechmer@csrstds.com

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Overview

What makes a monopoly?

Short history of monopolies

Why are monopolies bad?

Microsoft’s goal

Why are standards good?

Open standards alternative

What government action is best?

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What Makes a Monopoly?

1. What they supply is necessary.

2. They occupy peculiarly favored spots or lines of land.

3. The article or convenience they supply is used at the place where, and in connection with the plant or machinery by which, it is supplied.

4. This article or convenience can in general be largely, if not indefinitely, increased without proportionate increase in plant and capital.

5. Certainty and harmonious arrangement, which can only be attained by unity, are paramount considerations.

T.H. Farrer, The State in its Relation to Trade, 1883.

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Short History of Monopolies

Century Monopoly Form Conferred by

18th Toll roads, canals Royalty

19th Utilities Government

20th Compatibility * Market

* Standard Oil, IBM, Microsoft

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Stage: Emergence Expansion Market Domination Market abuse

Effect: Change Stability

Creative Destruction Destructive Creation

Why are Monopolies Bad?

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Microsoft Legal Goal

• Maintain control of Windows operating system application programming interfaces (APIs)

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Why are standards good?

• Define common interface

• Change by common agreement

• Do not require a disclosure of intellectual property

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Open Standards Alternative

In 1975 the FCC mandated standards (regulations now termed Part 68) creating the following large industries:

Modems

PBX’s

Answering machines

Telephones

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What Action is Best?

1. The rise of a competitive product or service

2. Government intervention

a. Control of the organization, e.g., utilities

b. Divestiture, e.g., AT&T, splitting the company into parts

c. The requirement of standards,

e.g., registered telephone jacks