CENTRAL VIEW for Monday, November 15, 1999

The courts: let no good software go unpunished

Fortunately, Donald Trump and his economy-wrecking plan will soon be filed away as one of the more bizarre ways of gaining public attention. Unfortunately, the lawsuit against Bill Gates’ MicroSoft has the potential of doing more long-term harm to the world’s computer-based economy than the Y2K bug.

Recently, a single federal district judge opined that IF the MicroSoft Corporation were to engage in certain monopolistic practices (which the judge concedes it has not engaged in) then MicroSoft would be a monopoly. Hopefully, this nebulous opinion will be overturned at the appellate level.

As a matter of fact, MicroSoft confers enormous benefits on software consumers. If MicroSoft is guilty of anything, it is guilty of pricing its software products so low than they are highly popular with consumers and guilty of giving certain products away (such as MicroSoft Internet Explorer®) to consumers which makes them even more popular.

Needless to say, MicroSoft is not popular with its competitors and it is the competitors of MicroSoft who are behind the government’s lawsuit. According to recent polls, even the general public shows a lot of sophistication on this matter because MicroSoft and its nerdy-looking CEO, Bill Gates, enjoy widespread popularity with the American public.

The reason for the popularity of MicroSoft products is pretty simple: they work very well and they are reasonably priced. For example, the current price of a fully-capable personal computer, to include a bundle of MicroSoft software, is about $1,600. The software portion of that cost is less then ten percent. Yet, without the software, the hardware is just a bunch of wiring and computer chips. In terms of value to the consumer, the software should be 90 percent of the cost and the hardware only ten percent.

But software is an intellectual product that is not dependent on the price of copper or other metals or the plastics that go into computer hardware. Therefore, despite enormous up-front development costs, MicroSoft has great latitude in how it prices its intellectual products. Instead of trying to recover its software development costs by charging its first few customers millions of dollars, MicroSoft charges relatively little to its customers over the long haul and recovers its development costs by high-volume sales.

Some of us started computing on a CPM-based system. When the much better Disk Operating System or DOS came along, CPM died. Next, Apple Computer offered software with an easy-to-use graphical interface. Back then, Apple had the chance to become today’s MicroSoft. But corporate greed drove Apple to charge very high prices for its hardware and to keep its internal architecture secret. By contrast, IBM published its architecture to the world. As a result, millions of affordable IBM PCs and IBM clones came on the market. Hundreds of thousands of software program have been written to run on IBM PCs and IBM clones.

Then came MicroSoft offering affordable software for the PC that had graphical interface features as good or better and as easy-to-use as Apple’s. Apple failed to respond to the competition and almost went bankrupt.

Meanwhile, the world fell in love with MicroSoft products. This column is written using MicroSoft Word®. While WordStar®, WordPerfect®, Clarus®, and Q&A® and others are okay, Word® is so far superior and affordable that it has become the world standard.

But how successful would any software company be if computer-illiterate judges assume de facto control of its marketing methods? It is the lack of government interference that has allowed the PC industry and the Internet to become so successful. Should the courts jump in to reward those who make poorer, less-affordable, software products by punishing MicroSoft for making superior, more-affordable software products? Let’s hope not.

William Hamilton is a nationally syndicated columnist and featured commentator for USA Today.

Dr. Hamilton can be contacted at:

Email: william@central-view.com