Who Decides What Innovations Go Into Your PC?

The Wall Street Journal, November 10, 1997

By Bill Gates
Chairman and CEO, Microsoft Corporation

If you asked customers who they would rather have deciding what innovations go into their computer – the government or software companies – the answer would be clear. They’d want the decision left to the marketplace, with competition driving improvements.

This is the question at the center of the Justice Department’s recent action aimed at forcing Microsoft to remove Internet Explorer from Windows. In this instance, consumer benefits seem to be less important than the complaints of a handful of our competitors who want the government to help them compete – by preventing Microsoft from enhancing its products.

The Justice Department’s position is equivalent to the government telling personal computer manufacturers that they can’t include word processing, spreadsheet or email functionality in PCs because it would be unfair to typewriter, calculator and courier companies.

Microsoft and the DOJ anticipated this very issue three years ago when we signed a consent decree that specifically allowed Microsoft to develop “integrated software products.” At the time, the DOJ was fully aware that we were planning to integrate Internet capabilities into the forthcoming Windows 95 operating system.

Microsoft has a long history of improving its operating system products and building in new functionality, just as Apple, IBM, Sun, Novell and others have. These features have included such things as a graphical user interface, memory management, type fonts, disk compression and networking. Every one of these was available first as a separate offering but eventually was integrated to meet customer demand for greater functionality in Windows.

Supporting Internet browsing in Windows is a logical, incremental step in the evolution of the operating system. For 15 years Microsoft operating systems have included as core technology the capacity to locate and use information from local sources – such as the hard drive or the CD drive – as well as remote sources, such as local area networks. Windows 95 simply permits users to get information from the newest remote source – the Internet.

When a PC manufacturer like Compaq, Dell or Gateway chooses to license Windows it agrees to ship all of the operating system, including Internet Explorer. Installing Windows 95 does not prevent OEMs from also shipping competing browser technology, such as Netscape’s Navigator, and many hardware manufacturers do just that. PC manufacturers are free to differentiate their products from one another in many ways — including by adding their choice of software products — but modifying Windows is not one of them.

Internet Explorer is much more than just a “web browser.” It provides important functionality that is the basis for other companies’ new software products. Without a uniform Windows installation, end users could not be sure of the performance of the integrated operating system and Microsoft could not stand behind its product. Furthermore, Windows would become Balkanized like the many incompatible versions of UNIX. This would eventually drive prices for PC products higher as software developers and hardware manufacturers would have to develop and test their products for all the different versions of Windows. And innovation would slow because developers would be reluctant to write new programs if they couldn’t be sure that new features would be present on all Windows PCs.

I doubt The New York Times would let a newsstand tear out the business section of the paper just because it wanted to sell more Wall Street Journals. Or that the Ford Motor Company would let its dealers replace a Ford engine with a Toyota engine. Microsoft has the right to preserve a consistent customer experience when using Windows.

Curiously, while the DOJ is claiming that Windows should not include browsing capabilities, Microsoft competitors are busy incorporating basic operating system services such as printing and running applications into their browsers, making them nothing less than…an operating system. If our competitors can integrate an operating system into their browsers in the name of competition, why should Microsoft be forbidden to integrate a browser into its operating system? Enhancing Windows to support Internet standards more fully is not a frill – it is critical for Windows to stay competitive. Telling Microsoft that we can’t improve Windows is telling us we can’t compete.

Since its inception more than 20 year ago, the PC industry has grown incredibly rapidly and provided real benefits for customers without the government regulating product designs. Creativity and entrepreneurship are flourishing as hundreds of new software companies and thousands of new products come to market each year.

Microsoft Windows has played an important role in this innovation, largely because it serves as an open, integrated platform for software developers, hardware vendors and solution providers. This gives them the incentive and the certainty they need to build products for Windows, which attracts more customers and, in turn, encourages greater demand, more innovation and new products.

There is no question that consumers are the big winners. Today, you can buy a PC for under $1,000 that is more powerful than a PC that just a few years ago was three or four times more expensive. Prices for software are constantly falling too, thanks, in part, to the stable development platform provided by Windows. In the late 1980s, business productivity applications such as word processors or spreadsheets typically cost several hundred dollars each. Now, you can buy a full suite of far better productivity applications for about the same price. In 1990, CD-ROMs containing games, encyclopedias and personal finance software cost $80 to $200. Today, it’s rare to see CD-ROMs for home users priced above $49.

And although Windows is by far the most popular operating system on the market today, the price has remained virtually the same for years while its performance has leapt forward. Unlike other operating systems, Windows will always be an open platform available at a reasonable price because that’s the key to attracting new software development and giving customers the kind of low-cost, innovative PCs they want and have come to expect. A high-volume, low-cost approach works only as long as the platform remains open, so we have a vested interest in keeping it that way.

The PC has provided millions of workers with the tools to do their jobs better, empowered students to become lifelong learners, and enabled consumers to enjoy exciting new forms of information, communication and entertainment on the Internet. In fact, the Internet promotes openness and competition more than almost any other invention of the last 100 years. The government should encourage the rich support for Internet standards that Microsoft is providing. The popularity of Windows does not create a chokehold on the Internet any more than a popular word processor chokes off free speech. Windows PCs allow people to browse the entire Internet easily. They allow anyone to become a publisher and to offer their goods and services to the global market at minimal cost and without anyone taking a fee.

U.S. antitrust laws do not exist to prop up competitors. The laws are intended to ensure that consumers benefit from the widespread availability of goods and services at fair prices, and that’s exactly what we have today.

Microsoft spends more every year to improve the Windows operating system. This year we will spend more than $1 billion on R&D for future versions of Windows. Over the next several decades we will enhance Windows so that computers can talk, listen, see and learn, making it dramatically easier to get at the benefits of the Internet. The PC business will have an exciting future if the government does not hold it back by regulating product design.

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