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Monday, January 28, 2008

Hazlett on the Microsoft Case at 10
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Good piece in FT.com today by Tom Hazlett of George Mason University. In the essay, Tom takes stock of what the Microsoft antitrust case did and did not accomplish over the past decade. After pointing out that the case fell short of the mark in terms of injecting Java-based competition into the marketplace as some had hoped, Tom notes:

But the decade has hardly been a bust for competition. It flourishes on margins unimagined by those who were professing to protect its path. Rivalry has come not from Java, but from a resurgent Apple and the open-source Linux. One is a vertically integrated firm with proprietary innovation; the other a geekdom of code-sharers seeking karma and human capital. Meanwhile, Microsoft’s Internet Explorer is coughing up market share to Mozilla, Netscape and Opera, browsers that ride comfortably on Windows.

But operating systems and browsers turned out to be a side show. The profits of the decade have been stolen by entrepreneurs who saw what was unfolding over a distant horizon. And then traversed that distance in a flash.While the DoJ was filing against Microsoft, two youngsters at Stanford were crawling the web. With a search engine that could catalogue and rank the world’s web sites, matching key words while filtering out mish mash, their start-up quickly entered the language as a verb -- a really popular verb. You can Google it.

Meanwhile, Apple has been making its own fortune under the shadow of the beast. It is crushing Microsoft in media players, finding its salvation in the holy i-trinity of Pod, Tunes and Phone. Domination of this digital consumer space was right there for the dreaming.

I think that's an excellent assessment of things and it illustrates how antitrust officials often get trapped in their static economy boxes, forgetting that markets are dynamic and technologies evolve to respond to consumer needs and desires. But the more troubling aspect of the case is what it has meant for Digital Age politics. As Tom aptly notes:

the case struck a decisive blow against the Silicon Valley hubris that it was beyond the range of regulatory attack. Its Maginot Line breached, the tech industry flipped from defense to offense, equipping new armies to do battle in Washington and Brussels. The sleeping giant now roars public policy. From libertarian survivalists to shock troops for “network neutrality” in just one decade.

Indeed, this is the exact fear I have articulated in the past. Is increased Silicon Valley engagement with Washington a good thing? I have my doubts, and not just because of the tech industry's active support for Net neutrality mandates. On the other hand, I can't blame them for coming here to defend their rights and be heard since all the companies and industries they compete against are already fully entrenched here inside the Beltway. It's all quite sad. The way I look at it, every dollar that technology companies use to lobby inside Washington is a dollar that could have been devoted to new investment and innovation in the marketplace.

posted by Adam Thierer @ 7:57 PM | Antitrust & Competition Policy

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