The rise of the Internet has affected the technology industry in three main ways, each of which tends to discourage monopoly power. First, no single company controls the Internet’s crucial technical standards. Second, it is a low-cost technology and though essentially a communications technology, it has helped accelerate the advance of low-cost economics in computing generally. Third, as a decentralized technology, the Internet holds the promise of dispersing market power.
Today’s embodiment of the Internet threat to Microsoft is Linux, an increasingly popular operating system and a real potential rival to Microsoft’s Windows. The business problem of competing against Linux is far trickier for Microsoft than was thwarting the early Internet challenge from browsing software and Netscape Communications, the commercial pioneer in browsers.
This time, for example, the competitive weapons in the Microsoft arsenal will be fewer because a federal appeals court has ruled that the bullying of industry partners and rivals to protect its monopoly was illegal. And Linux, an operating system written and updated by a worldwide community of volunteer programmers and distributed free, is a more elusive target. It already has broad industry support, and no single company stands behind it.
The Linux strategy is to undercut Microsoft, just as Microsoft was once regarded as a leading practitioner of low-cost economics in pricing its personal computer operating systems for high-volume sales.
Brian Behlendorf, a leader in the open-source development community, says the advance of Linux may well force Microsoft to take a drastic step to meet the competition. “My prediction is that within three years time, Microsoft will `give away’ its operating system to preserve its revenue in the applications business,” Mr. Behlendorf said.
Microsoft’s New Hurdles
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