Why would Bill Gates, who is worth about $50 billion, choose to challenge the federal government and twenty attorneys general over Web browsers? Rest assured that it is not about the profits that can be made from selling the Web browsers themselves. There are simply not enough dollars involved to make a real difference to Bill Gates or to Microsoft.
Picking a fight with powerful government regulators can only be justified for one of two reasons: a legitimate fear that Microsoft will be drastically reduced in value if the regulators get their way–or a reasonable prospect that Microsoft will dramatically increase in value if it gets its way.
The best way to protect and enhance Microsoft’s value is to transform its current 90 percent penetration in the opening system market (yesterday’s computing paradigm) into an equivalent penetration in the access to the Internet market (today’s computing paradigm).
The key tool enabling Microsoft to move from one paradigm to another is what the regulators call the “first-screen requirement.” Microsoft requires that all computers using Windows be shipped so that the first screen consumers see is exactly the screen that Microsoft wants them to see. The consumer has no ability to tell the manufacturer to change the first screen in any way.
Without the first-screen requirement, consumers might well decide to tell the manufacturer not to change the first screen and enjoy the “Windows experience” just as Microsoft hopes. On the other hand, they might just as easily allow or ask the manufacturer to change the first screen so that they can enjoy the “Compaq experience,” the “IBM experience” or even the “Netscape experience.”
Microsoft’s first-screen requirement is like a car manufacturer with a 90 percent market share telling its car buyers that they can replace the car radio, but only if they do the installation all by themselves. A few hardy souls may make the replacement, but the rest of us would probably decide that the original radio was good enough.
With the first-screen requirement, Microsoft’s browser does not have to be the best to achieve virtually total market penetration. It merely has to be “good enough” to prevent everyone other than the hardiest of users from changing to another browser.
With the “good enough” browser and the resulting market penetration, Microsoft would not only have control of users’ access to the Internet (along with resulting profits), but would be able to use its penetration in that market to be ready for the next paradigm, whatever it may be. With stakes that high, it is not surprising that Bill Gates and Microsoft have decided that a pitched battle with federal regulators is worth the risk.
