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Et Tu, Microsoft?

Mises Daily: Thursday, June 29, 2000 by

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As fast as the speed of technological innovation, so is the rate at which antitrust regulators are inventing reasons for hampering entrepreneurship. The ink on Judge Jackson's Microsoft decision was still damp when the Federal Trade Commission and Federal Communications Commission announced that they were investigating America Online (AOL) for alleged domination of the instant messaging industry. Again, the investigation is being cheered on by competitors, including Microsoft (so much for its principled stance against antitrust). And again, government lawyers are alleging the patently absurd.

The chief prerequisite for a single firm to effectively dominate a market is for other firms to be barred from entering the industry. This is clearly not the case. There is a veritable plethora of instant messaging services for consumers to choose from. If consumers do not like AOL's instant messaging service, they can use instant messaging provided by firms such as Microsoft, Tribal Voice, Inc., Novell, Infoseek, Excite, PoepleLink, and Lotus. There is even one designed especially for the building industry called BuildTalk.

AOL has come under scrutiny for restricting competition because it does not allow customers of other instant message services to send messages to AOL instant message users. These charges were not brought by consumers, but by AOL's competitors and professional lobbyists. In March of this year, eight companies including AT&T, Tribal Voice, Inc., and the hypocritical Microsoft, sent a letter to the Senate Commerce Committee aimed at getting Congress to put pressure on AOL to allow other instant messaging companies access to their users.

On April 25, two of AOL's competitors, iCast and Tribal Voice filed a complaint with the FCC, calling on the government to use its review of AOL’s merger with Time-Warner as a way to force AOL to "open its instant message service." The very next day, lobbyists including the Consumers Union, Media Access Project, and Center for Media education filed a formal petition with the FCC to block the merger because, among other things, AOL wants the decision whether to allow other companies open access to its servers to be voluntary.

So much for the right to private property. AOL owns the servers through which its instant messages are transmitted. They should be able to use them as they see fit. The government has no more right forcing them to allow other services access to their servers than it has forcing you to admit all comers to park in your garage.

Beyond this, however, the charge that AOL's constraint on its server usage bars competition is ludicrous. Jesse Burst, editorial director of ZDNet Anchor Desk, has called for a class action suit against AOL on the grounds that its huge membership gives it the ability "to treat its members like dirt." Now, if AOL really does treat its members like dirt, why do they still have 21 million? They cannot all be masochists.

Moreover, what stands out about all of the previously mentioned competing instant message services is that they are offered free of charge. How can one dominate a market if the competition is giving away their service as well? If consumers are not happy with AOL instant messaging, all they have to do is download one of the other services and it does not cost them a penny. With domination like this, who needs submission?

One can almost hear the Justice Department's objection. What good does it do a single consumer to register with a different service when all of his friends are registered with AOL? Well, if the service is free and of comparable quality, it should not be that hard to convince one’s friends to make the change. After all, there is no law, yet, against registering with more than one instant message service. If the friends do not want to make the change, it cannot be due to prices, but just maybe that they do not like the other services as well. So much for consumer protection.

The real monopoly that everyone should be concerned with is the all-encompassing government. For example, compare AOL's customer service with state run schooling (I am tempted to use the word education, but who's kidding whom?). AOL must convince their patrons to use its instant messaging voluntarily even though there is a multitude of competitors that are giving away the service for free.

However, the state forces everyone to go to school and then "leverages" their monopoly in violence to dominate the education market by giving schooling away for free to its patrons (while taxing the productive, of course, to pay for it), and regulating the remaining private competitors (who must charge for their services) so as to bring their educational mission in line with the dictates of the government monopolists.

As Joe Sobran brilliantly reminded us recently, "Bill Gates can’t arrest his competitors; he can’t lay armed siege to an eccentric religious sect; he can't punish you for boycotting Microsoft. And he can't distract attention from his troubles by bombing foreign countries." He also cannot force anyone to buy from him or anyone else. These privileges are reserved for the government and its favorites.

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Shawn Ritenour teaches economics at Southwest Bapist University. Send him MAIL.

See also Mises.org on Microsoft