1. http://www.standardsresearch.org ICSR 1 Microsoft Anti-Trust Litigation The Case for Standards Ken Krechmer Fellow, 2003 International Center for Standards Research University of Colorado at Boulder krechmer@csrstds.com

2. http://www.standardsresearch.org ICSR 2 Overview What makes a monopoly? Short history of monopolies Why are monopolies bad? Microsoft’s goal Why are standards good? Open standards alternative What government action is best?

3. http://www.standardsresearch.org ICSR 3 What Makes a Monopoly? 1. What they supply is necessary. 2. They occupy peculiarly favored spots or lines of land. 3. The article or convenience they supply is used at the place where, and in connection with the plant or machinery by which, it is supplied. 4. This article or convenience can in general be largely, if not indefinitely, increased without proportionate increase in plant and capital. 5. Certainty and harmonious arrangement, which can only be attained by unity, are paramount considerations. T.H. Farrer, The State in its Relation to Trade, 1883.

4. http://www.standardsresearch.org ICSR 4 Short History of Monopolies Century Monopoly Form Conferred by 18th Toll roads, canals Royalty 19th Utilities Government 20th Compatibility * Market * Standard Oil, IBM, Microsoft

5. http://www.standardsresearch.org ICSR 5 Stage: Emergence Expansion Market Domination Market abuse Effect: Change Stability Creative DestructionDestructive Creation Why are Monopolies Bad?

6. http://www.standardsresearch.org ICSR 6 Microsoft Legal Goal Maintain control of Windows operating system application programming interfaces (APIs)

7. http://www.standardsresearch.org ICSR 7 Why are standards good? Define common interface Change by common agreement Do not require a disclosure of intellectual property

8. http://www.standardsresearch.org ICSR 8 Open Standards Alternative In 1975 the FCC mandated standards (regulations now termed Part 68) creating the following large industries: Modems PBX’s Answering machines Telephones

9. http://www.standardsresearch.org ICSR 9 What Action is Best? 1. The rise of a competitive product or service 2. Government intervention a. Control of the organization, e.g., utilities b. Divestiture, e.g., AT&T, splitting the company into parts c. The requirement of standards, e.g., registered telephone jacks