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Posts Tagged with “competition”

Windows 7 Without IE

June 12th, 2009

Yesterday Microsoft announced that it is planning to ship Windows 7 without IE in Europe, and to offer IE separately.

It’s impossible to evaluate what this means until Microsoft describes — completely and with specificity — all the incentives and disincentives applicable to Windows OEMs. Without this it’s impossible to tell if Microsoft is giving something with one hand and taking it away with the other. For example, if Windows marketing dollars are tied to IE or browser-based programs, then the ties to Windows are still distorting the browser market. One could think of many other examples.

As a result it’s also impossible to tell whether this does anything more than change the technical installation process of the OEMs. It will certainly make life more difficult for people upgrading to Windows 7.

mitchell

Principle 6: Microsoft tools for developing content must not produce IE specific or Windows-specific results.

April 8th, 2009

Over 90% of the personal computer operating systems in the world are Windows.  As a result, application developers often use Microsoft tools to help write programs that work with Windows, and with related technologies or products that are integrated or often used with Windows.  Microsoft has a history of using its tools to lock out other products. For example, Microsoft web development tools  have often resulted in code that only works with IE.  The application developers may or may not even be aware of this.  They use a convenient tool provided by the operating system vendor, and end up helping extend the operating system monopoly to other products.

Examples of  tools to which this principle would apply include Microsoft Expression Web and Microsoft Office Sharepoint.  One might also include Silverlight and related development tools, or tools that do things such as embed MS Office documents in web pages.

This principle asserts that Microsoft cannot cause web or application developers to create IE-specific content by default.

EC Principle 4: Microsoft’s financial and other incentives to distributors must be browser-neutral

March 20th, 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.

EC Principle 2: Prelude

March 18th, 2009

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.

EC Theme: How can there be a problem when Firefox has growing marketshare?

February 19th, 2009

This idea sounds sort of reasonable at first, but it’s built on a logical fallacy.

The claim is that the tying of IE to Windows harms competition, innovation and user choice in browsers. Microsoft does not need to be 100% successful for this claim to be true. A single plant growing in a toxic environment does not mean that the environment is suddenly healthy. It doesn’t mean that all concern with the environment should fade or that attempts to improve the environment should be abandoned. That plant may be prosperous, but still deeply constrained by its environment.

Mozilla is extremely healthy, but still constrained by the environment IE has created. We’re constrained in being able to reach people of course, since IE is utterly ubiquitous and hides the possibilities of alternatives. We’re constrained in other ways as well. We’re constrained in our ability to enable new innovations — we need to find ways to make the Internet continue to work for the hundreds of millions of IE users who only Windows-based distributions reach. We’re constrained in the ability to build new standards into the Internet itself. In parts of the worlds — Asia in particular — we’re still highly constrained in our ability to even display web content, due to IE specific content.

And of course, the EC’s concern is not simply whether a single, unique “plant” like Mozilla can survive and prosper against all odds. The question is whether competition and innovation themselves are being harmed.

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