Fined if You Do, Fined if You Don’t
By Daniel R. Ballon
Guest Commentary
The European Union recently slapped Microsoft with a
penalty of $1.3 billion, the largest fine ever
levied against a single company. The timing is
curious because the penalty was issued just a week
after Microsoft posted on the Internet over 30,000
pages of its most closely held trade secrets.
This disclosure signaled the beginning of a radical
strategy to open the gates to the company's programs
and let innovators flood the market with compatible
products. Why would the EU discourage innovation and
punish successful firms for their ingenuity?
Microsoft's latest initiatives may empower startups
and independent developers, but this does not stop
the company's largest corporate rivals from lobbying
governments around the world to handicap their
dominant competitor, limit choices and force
inferior products on the consumer.
For more than a decade, rivals have argued that the
popularity of the Windows operating system renders
competition impossible without government
assistance. To level the playing field, regulators
in both the U.S. and Europe force Microsoft to help
its competitors design software for Windows which
functions as well as the company's own products.
Microsoft's latest announcement, however, far
exceeds these obligations and should nullify any
rationale for continued government scrutiny.
According to its new "interoperability principles,"
Microsoft will openly distribute all of the
information required to interface with its popular
products. Just as an electrical socket allows
countless devices to access the power grid, any
software developer can now "plug in" to programs
like Windows, Office, and Outlook. Not only will
this information be available free of charge, but
innovators can distribute their creations for free
without paying royalties to Microsoft. As a result,
consumers will soon have access to a nearly
limitless supply of applications enabling them
seamlessly to customize their desktops.
Why would Microsoft voluntarily relinquish the keys
to its most successful programs? During the decade
spent by regulators and competitors micromanaging
Microsoft's software, the entire nature of modern
computing changed. The Internet and online
applications today shape every aspect of a user's
experience, displacing the central importance of
installed software. In this arena, Microsoft has
been unable to gain traction on dominant players
like Google. With its commitment to openness, the
company acknowledges that achieving success on the
Internet requires radical new business strategies.
As a powerful platform for the rapid exchange of
ideas, the Internet brings together vast global
networks of innovators. By opening its software to
millions of collaborators, Microsoft hopes to help
its products adapt with changing technologies, and
seamlessly integrate the desktop with the Web. This
will enhance the company's reach into online
markets, create opportunities for independent
developers, and offer abundant choices for the
consumer.
Rather than embrace these benefits, regulators in
the European Commission are imposing exorbitant
fines and launching new investigations. After
collecting $700 million from Microsoft in September,
the EC has grown emboldened by their authority to
challenge and extort the American technology sector.
Believing that the government's role is to hold back
successful firms and ensure a level playing field,
Europe's competition commissioner Neelie Kroes seeks
to ratchet up Microsoft's punishment until achieving
"a significant drop in market share."
The "European Committee for Interoperable Systems" (ECIS),
a coalition of Microsoft's American rivals including
IBM, Sun Microsystems, and Oracle, eagerly exploits
the EC's willingness to help cripple their
competition.
Based on complaints from the ECIS, Kroes launched a
new investigation against Microsoft in January. Even
though the company's new strategy goes above and
beyond any remedies sought by ECIS, Kroes imposed a
$1.3 billion fine as retroactive punishment for not
acting sooner. Furthermore, she pledged to continue
the moot investigation, reserving the right to
impose additional arbitrary penalties in the future.
If she cannot inflict sufficient damage using fines,
Kroes will force the company to sabotage its own
products, making them less appealing to consumers.
Even though the Internet has become an indispensable
component of modern computing, the EC recently
launched a second investigation to determine whether
Microsoft should be forced to ship its Windows
operating system without any Web browsing
capabilities.
Creative companies with innovative ideas should be
rewarded in the marketplace, not punished by the
government. The EC's perverse system of incentives
penalizes popular products, while encouraging
anti-consumer practices such as collusion and
extortion. By imposing endless fines without any
path to reach compliance, Neelie Kroes saps the
motivation for technology firms worldwide to compete
and succeed. European regulators must stop treating
Microsoft as their personal ATM and allow consumers
everywhere to share the wealth.
Daniel Ballon, Ph.D., is a Fellow in Technology
Studies at the Pacific Research Institute in San
Francisco, California. |
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