By Dwight Johnson
Microsoft has issued a detailed
response to U.S. Department of Justice allegations refuting the
government’s charges.
Linux figures prominently in Microsoft’s arguments in ways which
significantly distort the truth.
For example, Microsoft claims:
“Market entry costs are very low and profit opportunities vast
in software platform technology, leading to constant efforts to
unseat the incumbent leader (witness the advance of Linux, a new
version of UNIX developed by a single individual). Once a software
program is developed, replication costs are very low, so a market
entrant can quickly and easily produce enough copies of its product
to immediately satisfy all demand.”
There are two significant distortions of fact in this
statement.
First, Linux was not developed by a single individual but by
thousands of individuals contributing hundreds of thousands of
man-hours.
Second, Microsoft suggests that, because replication costs are
low, it is therefore easy to launch a competitive product when, in
fact, marketing costs are by far the greatest part of the costs of
launching any product.
Further on, Microsoft states:
“The notion that either Intel or Microsoft pushes the other
around is completely inaccurate, and it’s especially absurd to
imagine that Microsoft could bully Intel, a large, successful
company with almost twice the annual revenues and double the number
of employees. It is also important to note that while Intel and
Microsoft are great business partners, both companies have also
worked with each other’s direct competitors for many years. Intel
has worked with other operating system manufacturers for 15 years
(it recently took a stake in Red Hat Software, a distributor of the
Linux operating system) and Microsoft has worked with other
microchip manufacturers for 10 years.”
Here, Microsoft seems to suggest that Intel’s taking an equity
stake in Red Hat proves that Intel was not bullied by Microsoft,
when, in fact, the Intel/Red Hat partnership was formed a year
after the Department of Justice sued Microsoft for its conduct. It
may well be that the Department of Justice’s law suit has forced
Microsoft to desist from its former behaviors.
Still further on, Microsoft asserts:
“Contrary to the Department of Justice’s assertions, market
entry costs are very low and profit opportunities vast in software
platform technology, leading to constant efforts to unseat the
incumbent leader (witness the very recent increasing popularity of
Linux, for example – a simplified version of UNIX originally
developed by a single individual).”
Microsoft is evidently hoping here that it’s previous statement
in the same vein but contained in the executive summary
will be the one read in the news media where it wants to sell its
case, reserving this more qualified statement for the more informed
Department of Justice attorneys.
Microsoft continues:
“Unlike in traditional industries, Microsoft controls no
productive capacity. A new entrant into the software industry need
not build a new chip fabrication plant for $2 billion, or even a
factory of any kind. The only necessary input for software
development is innovative programmers, inexpensive development
tools, and PCs or workstations, all of which are readily
available.”
Microsoft engages in two gross distortions here.
Microsoft suggests that the investment required for software
development is rather insignificant compared to a chip fabrication
plant when, in fact, it is not. Just the software development cost
Microsoft has invested in Windows NT would quite easily compare to
a chip fabrication plant construction.
The comparison with the GNU-Linux system is quite unjustified.
If the volunteered man-hours of development time were calculated at
market rates, the investment would be quite significant.
But the biggest missing variable in Microsoft’s calculation is,
once again, the marketing cost which Microsoft has totally excluded
but which is known to be by far the largest part of any successful
software product launch.
Microsoft seems to imply there is some direct comparison between
thousands of individuals contributing hundreds of thousands of
hours of labor hours to develop Linux and the labor and marketing
costs of developing and launching a commercial product when, in
fact, the comparison is much more complex.
Finally, Microsoft wants us believe:
“And, of course, Microsoft is not in a monopoly position in the
software market, however narrowly that market is defined. In
operating systems it faces competition from IBM OS/2, PC-DOS,
Caldera OpenDOS, Apple Mac, Linux, Novell NetWare, Sun Solaris, Sun
JavaOS, HP/UX, DEC VMS and Digital UNIX, Lucent Inferno, SCO
OpenServer and UNIXWare, IBM AIX and OS/400, and many embedded
real-time operating systems.”
Here, finally, we can agree with Microsoft. While Microsoft may
have seemed to have a monopoly when the Department of Justice filed
its complaint, it is quite clear today that Microsoft faces
formidable competition from Linux.