Is Windows a Monopoly?

[mikebw at bilow.bilow.uu.ids.net (Mike Bilow)]

                                Ralph Nader
                    P.O. Box 19312, Washington, DC 20036
                            Ralph at essential.org
                                 James Love
                       Consumer Project on Technology
                    P.O. Box 19367, Washington, DC 20036
           202.387.8030 | http://www.cptech.org | love at cptech.org
                                      
   June 15, 1998
   Joel I. Klein
   Assistant Attorney General
   Antitrust Division
   U.S. Department of Justice
   Washington, DC
   
   Dear Mr. Klein:
   
   I. Executive Summary
     * Microsoft's hostility toward antitrust measures, and the repeated
       failure of its management to abide by the letter or spirit of the
       agreements they sign, raises serious doubts that Microsoft can
       ever be expected to live up to the spirit of antitrust remedies
       which are based upon conduct rules. Many consumers and software
       developers are appalled at Microsoft's continued efforts to use
       the Windows OS as a weapon against its competitors, and its
       repeated attacks on non-proprietary Internet and computing
       standards, and are now interested in considering alternatives
     * Technology is creating opportunities for non-Microsoft operating
       systems (OSs). The availability of large hard drives, boot
       management software, interoperability based upon Internet open
       protocols, modular programming languages that lower costs to port
       applications across platforms, and easily cloned GUI interfaces,
       make alternative OSs more appealing and practical. One should not
       assume that every consumer in the World will always want to use
       the same operating system, sold by the same company.
     * Today it is impossible to buy a nationally branded personal
       computer without buying Microsoft Windows, and consumers cannot
       even return Windows for refunds. No nationally branded computer
       vendors sells PCs without non-Microsoft operating systems pre-
       installed, even as a dual boot option.
     * Microsoft uses its market power to discourage PC manufacturers
       from offering computers with non-Microsoft products, including
       non-Microsoft operating systems. There exist several promising
       non-Microsoft alternatives, including free software such as
       GNU/Linux or FreeBSD, or new systems like BeOS. It will be
       difficult for these alternatives to succeed in the broader
       consumer market if consumers cannot buy PCs with the alternative
       OS pre-installed.
     * The 1995 DOJ/Microsoft consent order has been ineffective in
       several important respects. DOJ should seek non-discriminatory
       licensing of Windows and Office products, so that PC vendors can
       offer non-Microsoft products without fear of retaliation from
       Microsoft, and ban per-computer licensing of Windows.
     * One of the most important challenges to Microsoft's monopoly is
       coming from the free software community, which is organized in a
       variety of ways. Free software products have already achieved
       significant success in server markets, and are becoming closer to
       mass market consumer products.
     * The Free software movement represents a major change in the way
       that complex software projects are organized, which could become
       more revolutionary and perhaps more fundamental than the changes
       associated with the Microsoft or Apple challenges to IBM. It is
       becoming more important at the same time that companies like Apple
       and IBM are abandoning development of mass market operating
       systems.
     * Developers of free software are concerned that Microsoft may use
       its market power to limit access to technical information needed
       for free software developers to write drivers for the next
       generation of hardware devices.
     * DOJ needs to better understand how the free software movement
       works, and to meet with developers and users from the free
       software community.
       
   II. DOJ should focus on barriers to entry faced by alternative
   operating systems
   
   We are writing to ask that the United States Department of Justice
   (DOJ) antitrust authorities focus on barriers to entry faced by
   alternative operating systems (OSs), including both proprietary
   systems and those based upon free software.
   
   According to persons who use alternative operating systems, or who
   develop software to run on alternative operating systems, there are
   several concerns which should be addressed by antitrust authorities.
   
   One set of issues concerns "original equipment manufacture" (OEM)
   distribution. Perhaps the most basic issue is to ensure that OEMs can
   sell PCs with a non-Microsoft OS pre-installed without risking
   retaliation from Microsoft. A related issue concern s the ability of
   OEMs to sell personal computers which run more than one OS, including
   one or more non-Microsoft OS, using readily available "boot manager"
   software. At a minimum, Microsoft should be banned from signing
   contracts with OEMs that require the OEM to charge consumers for
   Windows software even if the consumer doesn't want the software and
   won't use the software.
   
   A second set of issues concerns access to technical information needed
   to support drivers for devices supported by the OS. Computer users and
   software developers are concerned that Microsoft may use its monopoly
   power to limit access to technical information needed to write drivers
   for the next generation of hardware devices.
   
   Over the past several months we have received numerous messages from
   consumers who want to buy computers to use with non-Microsoft
   operating systems. They want the choice of purchasing a computer with
   the following options:
   
    1. a non-Microsoft operating system pre-installed,
    2. a "dual boot" computer that can run Microsoft Windows or a
       non-Microsoft operating system, where the user selects the OS at
       the time the computer "boots," or
    3. a "naked" computer, sold without any operating system, where the
       users acquire and install the OS themselves.
       
   On June 3, 1998, we published a survey of manufacturers of personal
   computers. David Chun, a university student working with us, contacted
   OEMs, identifying himself as an individual consumer. He asked if the
   OEM would sell any model of personal computer with an alternative
   operating system, or at least sell the system without Windows. (See
   attachment A, or
   http://www.essential.org/antitrust/ms/jun3survey.html). In each and
   every case, the OEM sales personnel said that the purchase of
   Microsoft Windows was required, even when the caller indicated that he
   did not want to purchase Windows and would not be using Windows. When
   OEMs were asked if it were possible to refuse to sign the Windows
   license and return the Windows software, every OEM said the refund
   would be zero. We conclude from this exercise and similar surveys we
   have conducted, as well as from many calls from consumers, that the
   1995 agreement concerning pre-processor licensing fees has been
   ineffective in several practical areas, and that consumers who do not
   want to use Microsoft Windows are paying a "tax" to Microsoft each
   time they buy a nationally branded computer.
   
   It is indeed incredible that in 1998, years after Microsoft signed a
   consent degree on Windows licensing with DOJ, things have not changed
   at all for consumers on the ground, raising fundamental questions
   about the ability of Microsoft to induce OEM behavior which is
   putatively prohibited by the consent degree. The 1995 agreement does
   not insulate OEMs from pressure Microsoft can deploy with
   discriminatory pricing of licenses for Windows or the core
   applications included in the Microsoft Office suite.
   
   We are also seeking guidance concerning the provisions in the 1995
   consent agreement, as they relate to the OEMs installation of Windows
   on dual boot PCs. Specifically, do OEMs have the unambiguous right to
   sell PCs with Windows and a non-Micro soft OS on the same machine,
   sharing the same hard drive?
   
   As indicated earlier, commercial distributors of GNU/Linux have
   approached a number of OEMs, to get a nationally branded PC shipped
   with a pre-installed version of GNU/Linux, or as a dual boot machine
   with both Windows and GNU/Linux installed. One leading Linux
   distributor told us that OEMs are extremely reluctant to ship PCs with
   pre-installed versions of Linux, for fear that the OEM will suffer
   from discriminatory treatment by Microsoft. The extremely competitive
   nature of the OEM business makes small price increases for Microsoft
   Windows or Office licenses very significant for OEMs. We are concerned
   that in the absence of non-discriminatory licensing for Windows or
   Office products, Microsoft may exercise too much control over the
   shipment of non-Microsoft products, including alternative operating
   systems.
   
   The issues concerning access to technical information and drivers for
   the next generation of hardware devices are complex. Again, we are
   concerned that Microsoft can use its market power to encourage
   hardware vendors to develop products, such as the so-called
   "win-modems" which only work with one operating system. If Microsoft
   engineers the OS, including its new use of television spectrum, to
   require secret and proprietary interfaces, it may provide a major
   barrier to a new OS, which would not work with new hardware devices.
   Our concerns on these issues are heightened by the fact that the U.S.
   Congress is considering legislation which many believe will be unduly
   restrictive concerning reverse engineering (
   http://www.dfc.org/issues/wipo/wipoimpl.html), and there are similar
   concerns regarding the proposed changes to Article 2B of the Uniform
   Commercial Code. ( http://www.cptech.org/ucc/ucc.html)
   
   III Technology makes entry by new operating systems practical.
   
   There are several reasons why we believe consumers have an important
   stake in the development and success of alternative operating systems,
   and why this is even more true in 1998 than it was in 1995.
   
    1. The Internet has made data itself much more portable, and it is no
       longer important for consumers to share the same operating system
       to share data.
    2. Applications are much more portable than they were in the 1980s.
       Software developers are now using modular development tools, such
       as C++ or Java, which make ports to new OS platforms much less
       costly than when developers used older languages, or assembly
       language.
    3. The economics of disk storage have radically changed. New PCs are
       shipping with vast disk space, making it practical for consumers
       to install more than one OS on the hard drive. For example, Dell
       is now shipping desktop computers with hard drives as large as
       16.8 gigabytes ( http://www.dell.com/products/dim/hdrive.htm).
       Most alternative operating systems can easily be installed in
       partitions of 1 gigabyte.
    4. Competition among operating systems is a spur to innovation.
       Microsoft Windows is a response to the Apple Macintosh, for
       example.
    5. User interfaces can be standardized across operating systems.
       Microsoft Office works the same on a Macintosh and Windows 95.
       WordPerfect and Netscape Communicator look and work the same on
       Windows 95 and Linux.
       
   Microsoft's hostility toward antitrust measures, and the repeated
   failure of its management to abide by the letter or spirit of the
   agreements they sign, raises serious doubts that Microsoft can ever be
   expected to live up to the spirit of antitrust remedies which are
   based upon conduct rules. Many consumers and software developers are
   appalled at Microsoft's continued efforts to use the Windows OS as a
   weapon against its competitors, and its repeated attacks on
   non-proprietary Internet and computing standards, and are now
   interested in considering alternatives.
   
   We encourage and support the development of alternative operating
   systems, including those which are based upon proprietary systems,
   such as the highly regarded BeOS, which supports an impressive array
   of new multimedia capabilities which clearly outperform Microsoft's
   products in many areas, as well as other commercial OS ventures. Your
   staff can find information on various commercial alternatives at web
   sites like AltOS ( http://www.altos.org.uk/linksindex.html), OS News
   (http://www.osnews.com/) or Convergence International (
   http://www.convergence.eu.org/).
   
   IV. The Free Software Movement is Important
   
   It is also important for DOJ to recognize the importance of the free
   software community. As you may know, there are many different
   institutions and movements to develop free software, both for
   operating systems and for applications, many of which run on different
   OS platforms. These are serious software products. Yahoo, Inc, which
   is valued at more than $5 billion, runs the largest web site on the
   Internet on FreeBSD, a free Unix operating system, and Apache, which
   is free server software. Indeed, Apache is a more widely used server
   than anything sold by Microsoft.
   
   There are many different models under which free software is
   developed. Thousands of software programs are developed under the GNU
   "copyleft" system, such as the highly rated GNU C++ compiler, and
   Linux, a Unix like system that has an estimated user base of 7 to 10
   million (See http://www.gnu.org, and http://www.linux.org). The
   FreeBSD project is a non-copyleft Unix system that is in the public
   domain (http://www.freebsd.org).
   
   The Xfree86 project develops a powerful cross platform windowing
   system that many prefer to Microsoft Windows (http://www.xfree86.org).
   It is supported by contributions from dozens of technology firms
   worldwide, including Compaq, S3, Trident, Number Nine, ATI, UUNET,
   S.u.S.E., Tekelec Airtronic GmbH, Xtreme, and Yokogawa Electric
   Corporation, to mention only a few.
   
   The Apache server is developed by the Apache Project
   (http://www.apache.org/). The popular software runs on Unix (different
   flavors including FreeBSD, Linux, Solaris, e.t.c.) OS/2 and Microsoft
   Windows. Although the product was only released in early 1995, by
   January 1998, Apache was used on more than half the domains on the
   Internet. (50.24% of the 1,834,710 sites,
   http://www.apache.org/press/05Jan98.txt). Many of the developers of
   Apache are IT professionals who support the Apache Project so they can
   have a stable open source code alternative to proprietary systems,
   such as Microsoft's NT server products. A similar effort supports
   Perl, a popular programming language often used in Internet
   applications (http://www.perl.org/).
   
   There are countless combinations and permutations of these products
   and systems. For example, you can download Linux over the Internet for
   free, or you can purchase various "distributions" of the software from
   commercial and non-commercial organizations (
   http://www.linux.org/dist/index.html). Companies like Red Hat or
   Caldera wrap various value added commercial products around GNU
   copylefted elements of the distribution, as well as software products
   which are distributed under the FreeBSD license, the Xfree86 license,
   the Netscape general public license, or many other variations. You can
   also buy commercial software, such as office productivity suites from
   Corel, Applixware or StarOffice, or commercial server or network
   products from Novell or Netscape, for example, which run on top of a
   GNU/Linux or FreeBSD system.
   
   What is astonishing is the sheer power and quality of many of the free
   software products, and the way in which data users have successfully
   launched products and entire operating systems that support demanding
   mission critical tasks. It is also interesting to note that
   Microsoft's predatory pricing practices, which have been often used to
   destroy its commercial rivals, cannot be used as a weapon against free
   software developers (although Microsoft can engage in other harmful
   antitcompetitive actions, such as acts which discourage OEM sales of
   PCs with a non-Microsoft OS pre-installed for users, or actions which
   make it difficult or impossible for free software developers to obtain
   technical information needed to write device drivers). We are also
   mindful that large companies like IBM and Apple have shrunk from the
   challenge of competing with Microsoft directly in the mass market for
   operating systems.
   
   Free operating systems like FreeBSD and Linux are evolving, and are
   approaching something that can be used by a general consumer audience.
   The Xfree86 windowing environment is an excellent graphical user
   interface that many users already prefer to the Windows interface. One
   area for improvement concerns better installation routines and broader
   support for hardware devices. Indeed, much of the user interest in OEM
   pre-installed distributions of Linux, for example, is based on
   consumers wanting to avoid the initial setup, and be assured that the
   Linux distribution will support the various hardware elements, such as
   video cards or backup devices.
   
   People in the free software community are concerned that Microsoft, or
   its business associates, may create barriers to access to important
   technical information needed for free software development,
   particularly that information needed to write device drivers or better
   installation routines. This is particularly important when the free
   software products themselves typically do not generate income, and the
   development is done by highly skilled and motivated volunteers, who
   cannot afford even modest fees that are sometimes required to obtain
   access to data. Also, free software products cannot be distributed if
   authors are responsible for per distribution royalties of any kind.
   
   We believe the modern free software movement is one of the most
   impressive examples ever of consumers organizing to create
   alternatives to high technology monopolies. It is a major change in
   the way that complex software projects are organized, which could
   become more revolutionary and perhaps more fundamental than the
   changes associated with the Microsoft or Apple challenges to IBM.
   
   We hope the present Administration will give weight and attention to
   the concerns of the free software users and developers, a community
   which lacks the public relations, lobbying and legal resources of
   large firms. In this respect, we ask that DOJ meet with persons in the
   free software development community to better appreciate the nature of
   the free software movement, particularly as it relates to antitrust
   issues, before DOJ becomes too committed to a particular course for
   the current litigation or the eventual remedies addressed in
   settlements.
   
   Thank you for your consideration of these issues.
   
   Sincerely,
   
   /s/
   Ralph Nader
   /s/
   James Love