Issue 225 of SOCIALIST REVIEW Published December 1998 Copyright Socialist Review


Caught in the net

Bill Gates

Last month the US Department of Justice decided to take the richest man in the world, Bill Gates, and his company Microsoft to court. The issue is very simple. A couple of years ago another company, Netscape, produced a piece of software, 'a browser' to help access the internet. Microsoft, which until then had been slow to pick up on the potential of the internet suddenly found itself with a rival and decided that it had to get in on the game. It tried to buy into Netscape and then tried to destroy it.

The method for driving Netscape out of the market was very simple. Microsoft produced a similar product, Internet Explorer, and gave it away free. Microsoft then used its weight as the world's dominant producer of software to persuade computer manufacturers not to include Netscape in PCs. So Bill Gates sent a memo to one company asking it, 'How much do we have to pay you to screw Netscape?' Netscape sales plummeted.

Why all the fuss? The producers of other computer products suddenly realised that what Microsoft was doing to Netscape it could do to them. The head of Lotus wrote, 'Microsoft regularly goes into accounts that we have won and offers software for nothing. We are dealing with a very big battle of strategic services.' The rest of US big business realised that one company was on its way to establishing a near monopoly in the computer market and could charge what it liked for its software. This is a minor matter if you use your PC at home but for a major bank like NatWest which has 300,000 PCs, the cost of software can be astronomical. So the US government has decided to intervene.

None of this is new. At the turn of the century Nelson Rockefeller established a monopoly on oil supplies with his company Standard Oil by controlling the oil refineries and then the transport of oil to squeeze his rivals out of the market. Standard Oil bribed politicians and business executives to drive its opponents out of business. Eventually the US government broke Standard Oil into various different companies which today still dominate the world's oil market.

Standard Oil and Microsoft's success is due to a few basic things. When using oil to fuel their home fires people want to be sure of a certain standard. When people switch on a PC they want a similar set up every time so they don't have to relearn things. Rockefeller's and Gates' successes have very little to do with innovations and a lot to do with bullying, using their market position to drive other, often better, products out of the market.

All the main innovations that are used in computing - point and click technology, networking, printing - were developed by a group of scientists employed by Xerox in long term research, not by market driven technology. They were simply told to go ahead and do what they wanted to create a user friendly computer. Their ideas have been the cornerstone of most of computing technology for the last 15 years, incorporated by Apple, Microsoft, and networking programmmes.

Bill Gates writes endless columns about how the US computer industry is a triumph of free market capitalism. However, Microsoft has only succeeded because it established itself as the standard by piggy-backing onto IBM, the world leader in computers until the 1980s and then proceeding to attempt to buy up or destroy any rivals.

The biggest limitation on Microsoft's software getting any better is its desire to make money. A number of smaller software companies including Netscape, in an attempt to catch up with Microsoft, have given away what is called the source code for their products. So if someone comes across a bug and fixes it then the solution can be circulated openly. In a rational society software would be distributed for free, people would fix its bugs as a challenge, and there would be some rational basis for deciding what sort of software people actually want.

Seth Harman

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