Archive for March, 2009

Microsoft has also used a range of techniques to encourage the distribution channel (often known as “the OEMs” for “original equipment manufacturers”) to ship IE. The OEM distribution channel is a funny thing. When I started working in this industry I assumed that the OEMs would pay software vendors for the right to distribute a piece of valuable software. But it turns out that’s backwards. The software maker pay the OEMs to include software on the OEM’s machine. So first the vendor makes the software, then they pay someone else to distribute it. The OEMs get to include software in their distribution packages for less-than-free — they make money by including software. This is because the distribution channel — the ability to actually get human beings to look at a piece of software — is so valuable. Software vendors end up paying for their products to reach people, and hoping to make money afterwards. For many product-focued people I think it is hard to internalize just how critical the ability to get people to pay attention to the product is, and how “distribution” can outweigh product quality in building success.

(This distribution channel is *so* valuable that Microsoft’s early efforts to promote IE in the 1990’s included threatening the OEMs with the loss of their ability to ship Windows (and thus the end of their business) if the OEMs didn’t ship IE exclusively. This practice stopped after the US judicial system determined a set of these sorts of practices to be illegal.)

Historically, software vendors generated revenue on upgrades and the licensing of subsequent and additional products. Today the models are diverse and complex, and may also include revenue-sharing between OEMs and software or service providers. For example, if you use a desktop search functionality, chances are high that the company you bought the machine from is getting a piece of revenue from the search provider.

This principle does not challenge these general business models. Like the other remedies, it is tied to the monopoly status of Windows, which requires all PC OEMs to work with Microsoft. In addition these programs cannot be matched by others because the Windows monopoly gives Microsoft a raft of unique tools. This principle prohibits the use of those tools to promote IE in ways that are unavailable to other browser manufacturers. It asserts that Windows monopoly status cannot be tied to financial incentives that further damage browser competition. Some examples of what this might mean are below.  There are undoubtedly many others.

• pricing of windows cannot vary based on whether IE is included or not
• payment for search/ad revenue or other service based revenues must not be conditional on IE being the browser.
• co-marketing efforts or amounts cannot vary based on the status of IE
• no financial incentives for OEMs to include links to IE anywhere in Windows

A complication of this principle is that it’s difficult to understand the complex relationships between Microsoft and the OEMs. There are a lot of details involved. It could be that one would agree intellectually, but find oneself unable to implement effectively. That’s again why I’ve separated out principles from remedies and implementation.

In summary, the OEM channel provides a way for a company with a lot of cash to pay to close off competition. This principle asserts that  a monopoly position plus the ability to pay to foreclose competition in related functionality is too much.

Some examples of what this might mean in practice summarized below from the earlier post.

• Option to download other browsers must be presented when a user is updating IE or Windows.
• IE may not become the default browser except in specified legitimate circumstances.
• Windows must ship with alternative browsers installed and offer users a choice.
• Windows must ship with a mechanism for downloading and installing a user’s browser choice.
• Windows may not include a browser (”untying” required).

Another way of thinking about this is : How much distribution advantage can Windows provide to IE? If one answers “as much as Microsoft wants with no limits” then this principle wouldn’t be implemented. If one answers “Windows can’t provide any distribution advantage to IE” then one would likely end up supporting a remedy that requires Windows to install a browser separately, based on a consumer’s decisions. If one answers “some” then one look to a of “must carry” remedy; a remedy that has been reported as of interest to the EC. Or one might look to some of the other options listed above.

One complication is the balance between encouraging competition and encouraging ease-of-use for the consumer. One might believe that a monopoly product like Windows should not provide any distribution advantage to IE, and yet simultaneously question whether an operating system without a web browser makes sense. Intellectually the principle might be right, but the remedy hard on consumers. I suspect many in the Mozilla world find ourselves looking at this dilemma.

Another complication is Microsoft’s long history and impact within the computer industry. Some of us have lived with Microsoft’s dominance for many cycles of the industry. To this group, the newer participants who believe Microsoft is a reasonable company that behaves within normal parameters are naive. To the new participants, the old-timers are weighted down by history and baggage and don’t see today clearly. It’s difficult to cross this divide.

One thing is clear. The ubiquity of Windows has meant the ubiquity of IE. As a result, millions of people believe that the blue “e” icon on their desktop IS the Internet. Changing that is a long, hard job. And until we do we magnify the difficulty of bringing competition to the browser space.

Microsoft has used Windows to make competition in browsers difficult in a variety of ways that aren’t obviously apparent to a consumer. These techniques are generally apparent only to other developers. Some of these will seem small when considered alone. But taken together these add up to a significant burden for other browser makers, and a significant advantage to IE.

Windows has provided technical advantages to IE through techniques such as those listed below. This list is not meant to be conclusive. It is meant to illustrate the range of ways in which Windows can and has made it difficult for other browsers to provide a competitive experience on Windows.

• Making information available to IE before or differently than that information is available to others.
• Making it difficult for other browsers to access browsing information stored in Windows, thus making migration and syncing painful for users and difficult for other browser makers to implement well. This includes information such as formats and metadata related to IE favorites, website passwords, and website cookies.
• IE use of undocumented Windows APIs.
• Providing APIs to IE available to Windows developers as part of the “Windows” API. As a result applications developed by third party developers can send URLs directly to IE rather than to the browser the user has selected as his or her choice.
• Requiring the use of IE to use the Windows update service. (Microsoft appears to have phased out this practice, or to have provided alternatives. I include it as an illustration of the ways Microsoft has, and could again, use Windows to damage competition in the browser space.)

The ubiquity of Windows brings this artificial competitive advantage for IE to almost every single person using a personal operating system. Redressing this setting will help refocus competition on the merits of the browser itself.

To go further with this principle we should identify all the ways Windows provides technical advantages to IE. If you’ve got examples please feel free to leave them here (we’ll review comments to previous posts for examples already given) or provide them by whatever means you feel comfortable with.

As I look at this principle (“Windows can’t provide a technical advantage to IE”), I’m sure that there will be a set of comments asking (a) why can’t Microsoft do whatever it wants with Windows, and (b) if there are limits on Microsoft, what about Apple? So I’ve added this post to address those questions.

The answer is the monopoly status of the Windows operating system. With over 90% market share for a decade or so, the concern is that this dominance allows Windows to damage the structure of competition. This concern is reflected in anti-trust laws. So this would not apply to Apple unless and until Apple has a monopoly or dominant position with the desktop operating system (today its market share is in the single digits).

It may be that many of the people saying Microsoft should be able to do whatever it wants are both familiar with anti-trust law and reject the entire idea. That’s a different discussion than the one I’m focused on. I’ve focused on two topics that bracket the legal decisions:

1. Has the integration of IE into Windows damaged competition? Mozilla has more experience in this area than almost anyone (Opera being the other long term competitor), so I feel qualified to address this; and
2. How do we think about remedies? What kinds of remedies make sense, which are likely to cause unintended consequences?

There’s an obvious question in the middle of these: Does the harm caused by the integration of IE into Windows violate EU competition/anti-trust law? That’s the classic “application of law to the facts of a case” at the heart of a legal decision. I know a lot about the factual difficulties of competing but much less about the precise application of European Union law.

The EC has signaled its preliminary conclusion that the integration does violate EU law and that remedies are likely to be imposed. I feel it’s important to try to have our experience and expertise reflected in the EC’s deliberations. Thus my focus on the difficulties of competing with IE in the current setting, and on the principles that might guide our thinking on remedies.

My blog theme has featured the Mozilla Ten Year Anniversary for just about a year now; reflecting my original idea of celebrating not just the past but the future. We didn’t actually do as much in the appreciation of the past as I had anticipated. Instead we celebrated Mozilla’s Anniversary by continuing to move forward as fast as we can. That’s very Mozilla-like; we often don’t spend much time celebrating before moving on to the next thing.

I’m moving to a new theme. It’s got a lighter feel than the Mozilla black-and-red and has greater flexibility for making things easy to find. I want to thank Monique Johnson, who took a bunch of the doodles I draw during meetings and turned them into a theme, and Craig Cook for implementing the design. Also John and Melissa and Tiffney for dealing with my inertia.