NCPA - National Center for Policy Analysis

Won't Breaking Up Microsoft Create Two Monopolies?

June 22, 2000

Why wouldn't splitting Microsoft in two just create "two monopolies," one having the most popular operating system, and another the most popular Office suite for that operating system?

To antitrust lawyers the word "monopoly" comes down to market share.

  • Thus, Microsoft Office is suddenly said to be a "monopoly" because Office has an estimated 88-93 percent of the office-suite market.
  • And Windows is said to hold a monopoly over operating systems because Microsoft's share of the worldwide market for Intel-compatible operating systems currently exceeds 95 percent.
  • But that alleged 95 percent share is not a fact at all, but an obsolete 1997 forecast from the International Data Corporation (IDC) about what the global inventory of computers was supposed to look like by now, were it not for Apple and Linux.
  • And there is not one Windows operating system but three, including Windows NT (2000), which has 30-38 percent of the server market, and Windows CE, which has less than 25 percent of the market for small devices.

"Intel-compatible" means IBM clones -- computers designed to run on Microsoft operating systems -- which arbitrarily excludes popular Motorola-compatible computers from Apple and Palm Pilot and SPARC-compatible "desktop systems" from Sun Microsystems.

To economists, the fact that most people prefer MS Office is no evidence of monopoly, since consumers and computer manufacturers can choose among several competent office-software suites, including Corel Word Perfect, Lotus Smart Suite, Appleworks, and Sun's Star Office (which is free).

Nor is the fact that most people prefer Palm Pilot to Windows CE, Sun's Solaris to Windows 2000, or Windows 98 to Mac or Linux.

To economists, monopoly means consumers have no choices, not that most of them prefer the same product.

Source: Alan Reynolds (Hudson Institute), "What Monopoly?" National Review Online, June 7, 2000.


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