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Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Microsoft vs Google; Squaring off as Justice watches

Fred Vogelstein writes in Wired that Google is drawing increasing attention from anti-trusters link here. He notes that it has gotten too big to ignore and perhaps to tolerate but continues to provide excellent software and services, presenting the government with a dilemma. Break it up or regulate. Definitely worth reading.

I do not think we can reach a reasonable conclusion on a single all-or-nothing position. In many respects both Microsoft and Google are natural monopolies, given the advantages to consumers of having a dominant standard and of being first to market.

In operating systems, Windows is what most people used first when they started computing. Most of us are familiar with it and it works quite well. Apple's operating system is not really relevant, an expensive niche product without the large number of add-ons, many free. Google has now offered an alternative in the form of cloud computing and the Chrome OS. This follows up on its relationship with Mozilla and the Firefox browser and opens an alternative to computer makers, a market for cheap simple computers like the netbook whose sales have been surprisingly good. (HP announced today that its Compaq division will soon offer a basic full size laptop for $298.) Chrome will prosper or not depending on the software that becomes available. By giving the software away, Google really puts pressure on Microsoft. Whether Microsoft can come up with an equally good, fast, down-sized modification of Windows and free software will determine its position in this market. Even if it does, the home computer market will become a duopoly but the advantages of being the standard OS are very high. I tend to go with Google.

The second big competitive area is search. Google's has come to dominate, its quality having stayed consistently ahead of the competition. Microsoft is trying, as well as a number of other search services. Microsoft has worked out a 10-year partnership with Yahoo on search, but for the time being, Google effectively has a monopoly based on quality, tempered by the fact that innovative competition continues to put pressure on Google.

Book scanning is unique in that Google is all by itself for now, although others would like to enter the business. The proposed settlement with copyright holders is problematic. It looks as if others will have difficulty entering, if they have to negotiate licensing arrangements with the copyright holders or buy into a deal similar to what Google has worked out. In other words, the Google deal will be a monopoly with no visible alternative, unless the court forces a major change in terms.

A business we don't normally think of as separate is the server farms that Google has developed. They make possible much of what Google does--indeed, it becomes the cloud in cloud computing. Its technology appears to be leading-edge. When it owns the infrastructure, it is tough to compete with.

Vogelstein begins his article, alluding to the speech of Christine Varney several years ago in which she says that "For me, Microsoft is so last century.... They are not the problem. I think we are going to continually see a problem, potentially, with Google." Varney has now been appointed head of the Justice Department's antitrust division, making her the government's most powerful anti-monopoly prosecutor and in a position to do something about Google. Google will need to watch its behavior to avoid retribution. Watchful waiting may not be a bad solution in a market with two large and highly competitive players, as well as a lot of small ones. It still seems to be producing a rapid stream of innovation.


Comments

And do not forget the miles upon miles of dark fiber they own!

Google's mission is to make the world's information accessible. The next logical step for Google is to provide that access. We are already seeing it attempt to do so at a smaller scale in Mountain View. Couple that with its efforts in ensuring open access in the "white space."

I am not convinced that operating systems are a natural monopoly. The Windows monopoly exists because of deal making that shut out competitors such as BeOS. Prior to this there was no dominant operating system.

Having switched several (non-geek) users from Windows to Linux, there is not a lot to learn for most of them - maybe how to install software, because Linux is very different (usually simpler, but different). Apple now has far too large a market share to be regarded as irrelevant, and their hardware is not expensive on a like for like comparison (although it is true their product line is missing bottom end products).

Chrome OS cannot possible create a duopoly because it is open source. It will be completely interoperable with Linux, because you can install it on top of Linux (it is in fact Linux with a bundle of Google software and customisations).

Hi,

Don't like to nit-pick, but market dominance as a result of serving the customer well without relying on natural monopoly or network effects is not monopoly.

The performance of Bing on its recent release illustrates how fragile Google's grip is, and given the switching costs, if anything better comes along, the market will follow.

The ease with which you can type your search into another engine is minuscule compared to how long it would take you to learn a new operating system...

Hamish.

That depends what you use the search engine for and what you use the operating system for.
Oh my,

Google is no more a monopoly than myspace is, the internet is fickle and they could loose dominance inside of several years. I was floored when she said MS was no longer a problem!! The hell its not, It is however a big campaign contributor ever since they were declared to be a monopoly and then made to apologize and promise not to do it again by the candidate they bought.


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