Dragonslayer

An interview with Ralph Nader who is organizing a conference in Washington, D.C., in Nov. 1997 to explore how Microsoft is extending its near-monopolistic control of the software business into other industries, including banking, insurance, car dealerships, travel services, real estate and television.


Jonathan Broder
October 10, 1997 11:00PM (UTC)

ralph Nader, the legendary consumer advocate, has a new enemy: Bill Gates and his software giant, Microsoft.

Nader is organizing a conference in Washington, D.C., next month that he says will explore how Microsoft is working to extend its near-monopolistic control of the software business into other industries, including banking, insurance, car dealerships, travel services, real estate and television.

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He has sent invitations to lawyers, writers, academics and corporate critics of Microsoft, along with Vice President Al Gore and Gates himself. The aim, Nader says, is to begin a public discussion about Microsoft's business practices and possibly mobilize the Justice Department's antitrust division to take the growing chorus of complaints more seriously.

Microsoft spokesperson Vivek Varma has called the conference, titled "Appraising Microsoft and its Global Strategy," a "misguided effort" driven by Microsoft's competitors and said the list of speakers "reads like a rogues' gallery."

Salon spoke about the conference and the alleged Microsoft's threat with Nader and Jamie Love, the technology specialist at Nader's Center for the Study of Responsive Law in Washington, D.C.

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Jim Clark of Netscape has called Microsoft an "evil corporation." Do you agree with that characterization?

Nader: The words I use is that Microsoft has strong monopolistic tendencies to their business strategy. Microsoft has this belief that if they don't control everything, they will control nothing. They have a total zero-sum view. With their 90 percent control of the operating system, which generates spectacular profit margins, they can use the money from this monopolistic position to leverage their control into one area after another. Their browser (Internet Explorer) is just one example of that.

What are others?

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Nader: Well, they are moving out from software, right through the computer industry to other service industries, like banking, insurance, travel, publishing and cable. And they're moving from conduit to content as well.

Netscape still controls the lion's share of the browser market. How do you see Microsoft taking that over?

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Love: In its implementation of Java, Microsoft has adopted a kind of "Java-plus" strategy. Rather than having the plain old Java code, they're using an embrace-and-extend strategy, whereby Microsoft embraces the open standard of Java but then throws in some extensions which make it perform better with future versions of Windows 95, but not at all with non-Microsoft systems. Sun Microsystems is now suing Microsoft for violating the licensing terms. We think the government could do something in the antitrust area regarding Microsoft's attempted perversion of Java.

Apart from the Java licensing issue, what is so wrong with Microsoft branching out into other fields?

Nader: First of all, apart from antitrust considerations, it's just not healthy for any economy and society to have one company play such a dominant role in even one field. It's even less healthy if that company has a dominant role in all kinds of commercial and industrial sectors. This isn't just John D. Rockefeller trying to dominate the oil industry. This is a company trying to be the toll collector at gateway after gateway on the information superhighway, using, in effect, a closed-door business strategy. The result is, innovation suffers. Venture capital for potential competitors dries up. Venture capitalists will say, "Why bother? Even if company X comes up with something that's good, it's not going to be able to deal with Microsoft's power."

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You said earlier that Microsoft was moving from conduit to content. What's the problem with that?

Nader: When it comes to content involving commercial transactions, the more control Microsoft has, the more they can intimidate critical reporting on them. For example, we had people who wanted to take part in the conference, but their CEOs squashed them. This was in industries like travel and newspapers. This spills over into news reporting as well. They now have MSNBC. There was rumor last week that Microsoft wants to buy CBS. We've already seen that the TV networks handle stories differently depending on their commercial alliances. For example, when some nuclear plants in Connecticut had to shut down last summer, CBS, which is owned by Westinghouse, and NBC, which is owned by General Electric, never reported it. So if Microsoft actually buys CBS and establishes more alliances, say with Disney , which owns ABC, the penumbra of their intimidation is going to be extraordinary.

Specifically,
how do you see Microsoft impacting the television business?

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Love: The real threat is down the road. With their monopoly over the operating
system, the question is: To what degree are they going to make the Microsoft
browser the front end to television sets, which is exactly what they want to
do? When you have (TCI Chairman) John Malone saying, "Microsoft is not going to dominate the cable industry the way they dominate the software industry," it's time to start worrying.

Why?

Love: Because Malone
is saying that he knows that Microsoft is interested in this
integration of multimedia through the front end of a television, and he's
afraid of Microsoft. Just yesterday, Microsoft announced that Windows 98 and
the new version of the Internet Explorer (4.0) will permit you to receive TV signals and download data directly into your computer. So down the road, when we turn on
our combination TV-computer, Gates would like control the operating system
that will help us navigate from video to audio to data to online commercial
transactions. He wants everybody who wants to play in that Web environment to
be his partner. And if you're a competitor, the odds are your products will be
hidden deep in the menus. They'll crash more. That's the game that's
already been played on the desktop. The question is whether or not Gates can
take it into multimedia.

Nader: In other areas, they will destroy entire industries. For instance,
the encyclopedia that Microsoft is in right now. They're not printing
encyclopedias. They've got an online version that is squeezing the existing
print versions. So in terms of access and the use of encyclopedias, Microsoft
is already the big kid on the block in an industry that's been operating for
150 years. In the billing and presentment area of the banking industry,
Microsoft is going to the banks and saying they'll give them the software for
free. Once they get a lock on that, they'll be the toll collector for that
whole area of online business. Just think of the leverage. Pretty soon,
they'll move into financial services. They're not going to build new banks.
They're just going to channel existing industries onto the information
superhighway. This is Microsoft's global business strategy.

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But isn't it true that as a Microsoft spokesperson said about the software business, that the whole field of high-tech is a "dynamic, innovative market." Wouldn't we be going in these directions, with or without Bill Gates?

Nader: When the auto started to replace the
horse-and-buggy, there were a lot of auto companies. They had
different engine systems and all kinds of different innovations. There was
the Stanley Steamer, an electric car, and the internal combustion engine.
What you're seeing here is not just a horse-and-buggy industry that's being
challenged; you're seeing dozens and dozens of industries that are being
challenged by an emerging monopolistic competitor. It's almost as if the
entire horse-and-buggy industry were challenged by a giant General Motors
from the get-go. And that is where the innovation will suffer, that's where pricing will become more and more
burdensome once the Microsoft monopoly kicks in. Don't forget that a lot of
monopolies get started with predatory pricing. One form of predatory pricing
is to give away your product, which is possible in Microsoft's case because of the enormous profits it gained from the monopoly over operating systems. That should be
considered unfair competition.

Love: Everybody expects technology to create upheavals in industry and new
players. What's unique about Microsoft is that it's trying to become the central player
in unprecedented areas of business.
Its ability to leverage its power, to provide the crucial
software for program interfaces, standards for performing secure credit card
transactions, video-streaming and so forth puts them in a position where they
become a partner in all these businesses. At any given moment, they can go
from being your partner to being your direct competitor.

What do you hope to achieve with the conference?

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Nader: We want the conference to put all this on the table, in public. We would like a response and a dialogue with Microsoft and
Bill Gates. In his book, "The Road Ahead," Gates made repeated points
about the need for dialogue on the emerging information superhighway
in a period of technological change. This conference is right square on
that principle.

You have said that some of the invitees felt intimidated from attending.

Nader: Of course. Why do you think the conference is being held in the first place?
There's a fear and intimidation that is spreading rapidly throughout the
software industry and is beginning the spread in the other industries that
Microsoft is starting to penetrate. This reluctance to speak out in a
supposedly free economy and free society is very unhealthy and very
troubling. The fact that Novell, which is very critical of Microsoft, doesn't
feel that it's able to make a presentation at the conference, illustrates
just how much the doors on free and critical speech in the business community are
closing. There's great fear. Some have even joked about needing a witness
protection program.

Have you been pressing the Justice Department on the issue?

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Nader: They don't respond. They just listen when we talk with them. They have three
problems. One is they're not adequately staffed with skilled people to deal
with a company like Microsoft and the high-velocity change in the industry.
Second, Microsoft is very politically wired through the vice president, the
president and other members of the administration. That sends its own signal
to the antitrust division of the Justice Department. And third, there is a great reluctance among the people who know about Microsoft's monopolistic practices to become willing and open witnesses. The ability of Microsoft to retaliate is a many unsplendored thing. They can do it by restricting access to the code committees, getting other companies to veer away from what they consider a Microsoft-unfriendly
corporate critic, they can raid them, move into their industry with predatory
pricing practices.


Jonathan Broder

Jonathan Broder is Salon's Washington correspondent.

MORE FROM Jonathan Broder


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