Bill Gates

THE FREEDOM TO INNOVATE

by William H. Gates III, CEO, Microsoft Co.

In this speech of Dec. 7, 1998, Bill Gates questions the Department of  Justice's continued pursuit of its lawsuit against Microsoft at a time when competition in the computer industry has never been more fierce.

    Thanks, everyone, for taking the time to come today. It's exactly three years ago that I spoke at another event that a lot of press attended. That was Microsoft's Internet Strategy Day. Think back to what was going on in our industry, just three years ago. Even though Microsoft had been working on Internet technology for several years at that point, a lot of people were writing our obituary, saying that we'd missed the Internet and could never catch up.
    On this day in 1995, we showed our customers and business partners that the Internet would be at the core of everything we did at Microsoft. We said the Internet was the wave of the future, and described how we already had begun to build Internet technology into virtually all of our products, to benefit both consumers and software developers.
    I guess someone thinks we did too well.
    When you stop and think, consumers aren't complaining about our Internet products -- our competitors are complaining. Consumers and software developers are seeing tremendous benefits from our commitment to the Internet.
    It would have been the ultimate paradox if we hadn't put browser support into the operating system. And customers would have been the losers if we hadn't supported Internet standards fully in Windows.
    It's unfortunate that the government is listening to the alliance of IBM, Sun, AOL and Oracle and ignoring all the ways our efforts to help consumers have moved forward. You really have to ask yourself the question: who is the U.S. government representing -- a handful of competitors or the consumers?
    Continuing to evolve the Internet technologies in Windows is great for consumers and great for thousands of software companies. Ironically, that's why we find ourselves in court today. When we first included browsing in Windows -- way back with the very first release of Windows 95 to OEMs -- people didn't use it much. People only started using our browser technologies when we won reviews. We kept improving our technologies, and many consumers decided our technology was better. That's the way competition is supposed to work.
    The software industry is one of the great engines of economic growth and job creation. Over the past eight years, the number of software jobs in this country has doubled. The number of software companies has doubled. Competition is incredibly fierce, and consumers are benefiting through better products and constant innovation.
    The government's case undermines the fundamental principle that has made our industry such an economic and consumer success story. Just like every other company, Microsoft must have the freedom to innovate and to improve our products. Like everyone else, we're working hard to compete and understand the business dynamics of the Internet. The Internet has changed the rules of the game in our business and many others. Success today is no guarantee of success tomorrow. New technologies, new business models and alliances are forming every day.
    When you look at the AOL-Netscape deal, it's hard to believe the government can still push their case with a straight face. The AOL deal shows the high tech market changing more quickly than any other industry on earth. Three of our biggest competitors have banded together to compete against Microsoft, and yet amazingly, the government is still trying to slow Microsoft down.
    As we saw in the IBM case in the '70s and '80s, advances in the technology marketplace move a lot faster than government regulation and anti-trust lawsuits.
    A key point which is central to this case is whether browser technology should be free. This is one of the great ironies of this case - the government is trying to increase the price consumers pay for browsing.
    We recognized a long time ago - before Netscape ever shipped its first browser - that browsing is a natural part of an operating system. In fact, I shared that view with Jim Clark (of Netscape). By integrating, customers get a single, simple interface to access all types of information. And it makes it easy for software developers to tap the power of the Internet in their own applications.
    Just like the many other features we add to Windows, there is no other extra charge for our browser technology. This makes business sense because it makes Windows more appealing and generates advertising income. It's the same reason you can get a cell phone for free.
    It's the same reason why the TV networks don't charge you to watch their programs. The cell phones make money selling telephone access, and the TV networks selling advertising.
    And the free browser business is valuable because it generates so much advertising revenue and important business opportunities in other areas like servers.
    Why did AOL pay $4 billion for Netscape, even though Netscape's browser is free? What does this say about the government's claim that Netscape can't distribute its browser? AOL knows there is incredible value in the advertising revenues that can be derived from Netscape's browser business. So contrary to what the government lawyers say, I'd say AOL paying billions of dollars for Netscape's browser business shows that the marketplace is working just fine, and there is no need for the government to try to raise browser prices. I am proud of the work our people have done to bring the benefits of the Internet to consumers, and I am confident that the courts ultimately will uphold the importance of the freedom to innovate.

Thank you.

1998 Microsoft Corporation. All rights reserved.

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Computerized image of a  boy Image of a teenager Image of a cosmonaut
Computer graphics technology of the 80th. Issued by Bulgaria in 1985.

In the Feb. 9, 1999 issue of the PC Magazine its main columnist, Mr. John Dvorak, published an article under the title: "Nationalize Microsoft." Accordingly to Mr. Dvorak, "Microsoft has gone too long as a mad dog on the loose", and should be nationalized and run by the government.

See below a short extract from the article "Regulatory Extorsion", by Thomas J. DiLorenzo, profesor of economics at Loyola College in Baltimore. The article was published in the March 2000 issue of the "Ideas on Liberty" magazine (www.fee.org).

The Regulatory Attack on Microsoft

     Microsoft's critics claim to believe that what is bad for Microsoft (in antitrust prosecution) is good for the rest of the computer industry and vice versa because of Microsoft allegedly "exclusionary" practices Microsoft is supposedly "a treat to everybody in the industry," according to Allan Ashton, president of WordPerfect, which has lost almost of its market share to Microsoft Word.
     In a forthcoming article in the Journal of Financial Economics, Thomas Hazlett and George Bittlingmayer expose this as a myth. The authors surveyed all Wall Street Journal articles from 1991 through 1997 announcing the investigation and litigation and gauged the reaction of the stock market to it. Categorizing all news stories about the regulatory assault on Microsoft as "positive," "negative," and "ambiguous," they found that:

      When Microsoft receives good news, its stockholders experience average market-adjusted returns of 2.4%. But the news is also good for the industry as a whole, which sees average returns of 1.2% over the same dates. (Both returns are significantly greater then zero at standard level of statistical significance). During negative events... Microsoft stockholders incur average returns of minus 1.2% per event, while the non-Microsoft computer portfolio declines 0.6%.

     The return of a few companies, such as Netscape, which is the leading the lobbying and public relation attack on Microsoft, enjoy increased stock prices whenever the news is bad for Microsoft, which explains why it is investigating the political assault on its rival. It is merely attempting to achieve through politics what it has failed to achieve in the competitive marketplace.
     The regulatory persecution of Microsoft is yet another example of regulatory extortion. The political establishment is busy extracting "protection money" from Microsoft in return for its promise to allow the company to exist.

Taken from" ANTITRUST", by Alan Greenspan, from a paper given at the Antitrust Seminar of the National Association of Business Economists, Cleveland, September 25, 1961.

The world of antitrust is reminiscent of Alice's Wonderland's: everything seemingly is, yet apparently isn't, simultaneously. It is a world in which the competition is lauded as the basic axiom and guiding principle, yet "too much" competition is condemned as "cutthroat". It is a world in which actions designed to limit competition are branded as criminal when taken by businessmen, yet praised as "enlightened" when initiated by government. It is a world in which the law is so vague that businessmen have no way of knowing whether specific action will be declared illegal until they hear the judge's verdict - after the fact."....

Link: The Microsoft Defence

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