BUSINESSWEEK ONLINE : JUNE 26, 2000 ISSUE
NEWS: ANALYSIS & COMMENTARY Commentary: Lessons from the Web--A World without Monopolies In their final squirms to avert a breakup, Microsoft Corp.'s (MSFT) executives and advocates are warning that a company split would spell disaster. It would harm shareholders and do damage to consumers. And the computing world would be left with no dependable software standards. We would soon confront a jungle of competing software choices, making life miserable for software developers and throttling innovation. The only kernel of truth here is that investors may indeed take a bath if Microsoft gets carved up. On the other points, the world has little to fear. Back when windows were still just panes of glass--rather than pains somewhere else--engineers already knew perfectly well how to create standards for entire industries. Witness railroad ties and electrical sockets. Now, in the Internet economy, standards are being set faster than ever. But, in contrast to Windows, they haven't necessarily been set, controlled, or owned by one company. Instead, many are open. And the overwhelming consensus of engineers is that open is now the only way to go. SHIPSHAPE. The best example is the Web itself. Built by Tim Berners-Lee, drawing on years of computer science innovations in the non-Windows world, it became a global force far more quickly than Windows did under the rigid control of William H. Gates III. Today, forums of engineers, such as the World Wide Web Consortium, keep the Web shipshape, and no company dictates what features should be added, or when. As a result, innovations and standards are being spawned at an astonishing pace. You can see this in explosion of MP3, a standard for compressing music files; in XML, which is the next lingua franca of the Web; and in the Java programming language, which Sun Microsystems Inc. (SUNW) is handing, toll-free, to the e-commerce community. ''The Web is democratic, it is an equalizer, it breaks up monopolies,'' declares Leonard Kleinrock, an original creator of the Internet, who now heads a wireless startup called Nomadix Inc. Not everyone agrees with Kleinrock. Economists--many of them opposed to a Microsoft breakup--say that monopolies are inevitable and even good for innovation. They argue that the value of any communications tool, be it a PC, a cell phone, or a piece of software such as Windows, increases as more people use it. This so-called network effect creates a frantic winner-take-all race to be the dominant player. And the dominant player may in some cases choose to keep a lock on a technology that it creates and builds into a standard. This pattern certainly applies to the first two decades of the PC industry, explaining the rise of companies like Microsoft, Oracle (ORCL), and Cisco Systems (CSCO). All three own and police software that has become standard. But the last 20 years may be an anomaly. When it comes to the Web, there's less evidence for ''natural monopolies''--especially those that own technical standards. The Web is a place where hundreds of alternatives can happily co-exist, each suiting a different segment of the Net's citizenry. Search engines are a good example, says Richard H. Howard, director of wireless research at Lucent Technologies Inc.'s Bell Laboratories. ''My daughter uses easy search tools to look up fairy penguins,'' he says, while he uses the high-powered stuff. That's in contrast to the bloated one-size-fits-all programs in Microsoft Office. The flourishing of open standards is boosting options for hardware users, too. In photography, the duopoly of Eastman Kodak Co. (EK) and Fuji Foto Film Co. (FUJIY) has made room for a wave of alternatives, from flash chips in digital cameras to storage services such as America Online Inc.'s (AOL) ''You've Got Pictures.'' Films can be watched on video, digital satellite, cable, DVD--and even the Web. In the mobile phone arena, Europeans long ago banded together to create a single standard called GSM, which lets users tote cell phones from many companies across most borders. As diverse wireless gizmos populate the Net, choices will proliferate, and companies will find it harder to lock customers in. In each of these areas, there are corporate giants sporting well-known brands such as Sony (SNE), AOL, AT&T (T), and Nokia (NOK). Some still own proprietary technologies, which they wish to promote as industry standards. To avoid the pitfalls of soon-to-be-outdated technology monopolies, they should learn the positive lessons of the Web. By Neil Gross Gross covers new technologies. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Great Antitrust Debate TABLE: Hurdles for the New Antitrust Will the Appeal Hold Water? Commentary: Lessons from the Web--A World without Monopolies Microsoft's Killer Apps TABLE: Microsoft Unchained INTERACT E-Mail to Business Week Online

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