Kearns' column: Dispelling the delusions about dismantling MS

One of the major arguments offered by the pundits who oppose Judge Thomas Penfield Jackson's penalties against Microsoft in the recent antitrust trial is they will lead to higher software prices.

"Today, Microsoft has a strong incentive to price Windows low because Windows sales often lead to lucrative orders for Office and other Microsoft products. But after divestiture, the owner of Windows would no longer earn these ancillary revenues and would thus have very good reasons to charge more for its sole product," said Richard Schmalensee, dean of the Sloan School of Business at the Massachusetts Institute of Technology, in a column published in the June 8 edition of the Los Angeles Times.

There are two fallacies here. The first is that the baby Bill operating system company would have only one product. Because Microsoft sells five operating systems (Windows 98, Windows 2000 Professional, Windows 2000 Server, Windows CE and embedded Windows NT) with more planned, there's nothing to indicate that more operating systems would not be forthcoming. Also, Microsoft has shown it can develop Windows for non-Intel platforms. Doing so again could allow for more computing choices for users and more revenue for the firm.

The second fallacy is the baby Bill applications company would be able to continue to charge such "lucrative" prices. Almost alone among software applications, the price of the Microsoft Office suite has risen dramatically in the past seven years. Besides an increase in the suggested retail price, licence changes removing the ability to license by concurrent usage means more copies need to be purchased to service the same number of users. Without the inside knowledge of the operating system that both sides in the case admit the applications programmers at Microsoft have, the playing field for performance is levelled, and applications such as Office will need to compete on price.

Even if the price of Windows should double, this is easily offset by the halving of the applications prices resulting in a lower total price for the OS/apps combination. It seems like a good thing to me.

Kearns, a former network administrator, is a freelance writer and consultant in Austin, Texas. He can be reached at wired@vquill.com.

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