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Microsoft

In: Business and Management

Submitted By zagh87
Words 15664
Pages 63
Creating Competition in the
Market for Operating Systems:
A Structural Remedy for Microsoft

Thomas M. Lenard, Ph.D.
Vice President for Research
The Progress & Freedom Foundation

January 2000

©Copyright 2000, The Progress & Freedom Foundation. All rights reserved.

TABLE OF CONTENTS

EXECUTIVE SUMMARY iii

I. INTRODUCTION 1

II. MICROSOFT’S OPERATING SYSTEM MONOPOLY 3

III. NEW MARKET DEVELOPMENTS 5

A. America Online/Netscape Merger 5 B. America Online/ Time Warner Merger 6 C. Linux 6 D. Information Appliances 6 E. Web-Based Computing 7

IV. ANTICOMPETITIVE ACTS: THE NETSCAPE BROWSER 8

A. Market Division Proposal 9 B. Exclusive Arrangements with Original Equipment Manufacturers (OEMs) 9 C. Exclusive Arrangements with Internet Access Providers (IAPs) 10

V. OTHER ANTICOMPETITIVE ACTS 12

A. Java 12 B. Intel 12 C. IBM 13

VI. HARM TO CONSUMERS 14

VII. ALTERNATIVE REMEDIES 16

A. Conduct Remedies 16 B. Structural Remedies 17 1. Functional Divestiture 18 2. Full Division Remedy 19 3. One-Time Licensing Auction 21

VIII. The Hybrid Structural Remedy 22

A. The Minimum Scope of the Windows Company 23 B. The Applications Company 24 C. Addition of Products into the Windows Companies 25 D. Other Operational Issues 26 1. Shareholders 26 2. Intellectual Property 27 3. Employees 27 4. Contracts 28 5. Pecuniary Assets and Investments 28 E. Measures to Preserve the Hybrid Structural Remedy 28

IX. BENEFITS OF THE HYBRID REMEDY 31

A. Operating Systems Competition 31 B. Competition in the Applications Market 32 C. Competition in Hardware Platforms 32 D. Browser Competition 33

X. THE OPERATING SYSTEM FRAGMENTATION ISSUE 34

A. Short-Run Compatibility 34

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