Without much fanfare, this month Microsoft announced that it is phasing out its notorious Internet browser called Internet Explorer. In all the news stories about this, the main focus has been on how it has been outcompeted by Chrome, Safari, and Firefox, among many other browsers on the market. In addition, mobile applications are making gigantic gains over web browsing in general.
Indeed that is true.
On the platforms I’ve managed, I watched as IE went from 95% of use to 20%, a spectacular and well-deserved crash and burn that took fully 20 years. Microsoft was never able to fix its interminable security problems. Each new version, from 1 to 10, seemed to fix some issues from the previous version while introducing more problems.
It wasn’t entirely Microsoft’s fault either: as the dominant browser, it was subjected to non-stop hacking from every malware creator in the world. Even Microsoft’s team of a thousand developers couldn’t overcome this. It didn’t help that Microsoft itself was crippled by its sheer size and bureaucratic management structure.
What we have here is a normal story of how markets work. IE was once cool, way better than the jalopy it displaced (Netscape Navigator), but it was unable to keep up against other and more nimble innovators it inspired. It had a 20-year run of it, which isn’t so bad. But history moves forward and in the wild world of the Internet, no one can presume that market dominance means permanent market power.
Tell that to the Department of Justice!
The DoJ was the main player in a story that seems to be oddly forgotten. The DoJ hounded Microsoft for fully 10 years from 1994 to 2004 over its alleged monopolistic behavior. Even in the early years of the web, government regulators and judges had presumed to know better than entrepreneurs how to structure the market. In a long series of judgements, regulations, settlements, and impositions, the antitrust regulators diverted countless billions away from market progress toward litigation, which, in the end, turns out to be about absolutely nothing.
It wasn’t antitrust regulators that killed IE. It was market competition.
The saga began when Microsoft released its browser as a preinstalled part of the Windows operating system. This action was considered to be a no no because it somehow represented an exploitative vertical integration of products that harms consumers, and stood in violation of a court order dating from 1994.
But there was a slight problem: IE was a free product! In fact, in a move that is genius in retrospect, Microsoft decided not to charge for its browser so that it could avoid paying agreed-upon royalties to the providers of its original basecode (Spyglass, Inc.). The whole rationale of old-time antitrust was that consumers were being robbed. It didn’t quite fit this case. Government attorneys persisted in any case.
And yet every antitrust case has a deeper history. Without exception, these cases are traceable to some market player who finds it easier to compete through the violence of government action than the peaceful way of making a better product or service.
In this case, the prime mover — the snake whispering in the ear of the King — was Netscape Navigator. This was the main browser on the market in 1995 and the one most threatened by Microsoft’s innovative pricing model.
For ten long years, of depositions and hearings and appeals, we had to endure endless kvetching by Netscape even as its market share sunk further and further. The trial ultimately ended in a judgement against Microsoft, and featured such goofy scenes as the judge right clicking on IE on the desktop and then proclaiming that he removed it from the computer!
It was amazing to watch because even as this titan was fighting for its right to give its products away, other companies were sneaking up from behind to offer better browsers. More extraordinarily, new operating systems were coming along to threaten the near monopoly of Windows OS, which was the whole basis for the government’s case to begin with.
Those of us who were opposing all this harassment of Microsoft would often point out that competitors could someday displace both IE and Windows. All our arguments were met with incredulous guffaws. Clearly without some major government action to smash Microsoft, the company’s powerful monopoly would last forever!
These were also the years in which Mozilla’s Firefox browser became the fashionable choice among the tech set. Others prefer eccentric tools like Opera. Safari, as part of the emergent Apple operating system, was waiting in the wings. And others were experimenting with using open-source systems like Linux for consumer use.
It was very clear to anyone in the industry at the time that Microsoft’s dominance was extremely fragile. But that’s not how the DoJ saw it. Government attorneys treated Bill Gates like he was some latter-day Rockefeller, a digital-age Robber Baron who deserved the harshest possible punishment for his egregious innovation that brought web browsing to the multitudes.
All these years later, we can easily see who was right. The free market critics of the government’s action nailed it perfectly. Linux eventually came to be rolled into Google’s own new browser Chrome to become its own free-standing operating system powered not by software suites but rather downloadable applications. This is truly an awesome development that absolutely no one could have anticipated in 1999.
What’s even more extraordinary is how applications running on smartphones have themselves begun to eat into the market for web browsers in general. Here again, this was a development that no one could have imagined even ten years ago.
One reason that people don’t talk about this antitrust action much anymore is that it never really amounted to much. The case was eventually settled long after it didn’t really matter that much. The entire case seems to be a kind of footnote in the incredible rise of the 21st century digital age.
But how much in resources and development attention was wasted in the course of those ten years? It’s impossible to say. Maybe IE would have died regardless. But maybe, had the government not litigated so hard all those years, millions of consumers might have been spared the persistent problems of IE’s security holes, and, just maybe, Chrome and Safari wouldn’t have enjoyed such a fast rise.
We’ll never really know. What we do know is that this antitrust action didn’t help a single consumer on the planet. It was all a gigantic diversion from the heart of the story.
What was the gain and who won? Lawyers, bureaucrats, grandstanding politicians were all winners. But something much more substantial and important happened in these years. A revolutionary and fundamentally disruptive company, Microsoft, came to be civilized according to Washington’s definition of that term.
It opened up lobbying offices in D.C. It started a program of large-scale political contributions. It ended its practice of permissionless innovation and started playing the game. In short, Microsoft made the decision to buy its way into the ruling-class apparatus rather than face unending harassment and possible death at the hands of the regime. I can’t blame them for their choice. But let’s not be blind as to the real purpose of all this litigation.
Competitive markets are a process of ongoing upheaval in service of the consuming public. There is nothing government can do to improve them and much it can do to disturb and divert their awesome productive capacities. But government can successfully blackmail innovators into a compliant posture, at least for a time.