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From anti-antitrust to antitrust

Microsoft, a company famous for fighting the very notion of antitrust law, is now appealing to it to keep its threatening new competitor at bay.
/ Source: contributor

In my book "Copyrights and Copywrongs," I made a case that companies, individuals, and industries orient themselves toward the copyright system in a predictable yet inconsistent way.

They support loose and open copyright when they are "copyright poor" and support high and tight restrictions after they take advantage of the loose and open system to create value.

One of my case studies was Microsoft Corp. Microsoft built itself by copying innovative software concepts and taking advantage of the idea-expression dichotomy in copyright law. Then, after it leveraged its network effects it grew into one of the world's leading copyright hawks. (No-duh disclosure: is a partnership between Microsoft and NBC Universal.)

Now, we see an interesting twist on that model. A company famous for fighting the very notion of antitrust law is now appealing to it to keep its threatening new competitor at bay.

Back in 2000 Microsoft was convicted in federal court of serious antitrust violations. The Bush administration, in an early example of its willingness to rig competition for its friends (see Halliburton) and against open markets, decided not to punish Microsoft for monopolistic behavior. In Europe, where competition policy remains relevant (because Europeans actually believe in markets), Microsoft remains under strong scrutiny.

Now we find that Microsoft is panicking about anti-competitive potential of the new Microsoft: Google.

In recent years, people who worry about concentrated power on the Internet have worried less about Microsoft and AOL and more about Google and the telecoms and cable companies. Both Microsoft and AOL have shown themselves to be clumsy innovators in the Internet age.

AOL has shown the folly of peaking too soon in a dynamic and innovative arena. It once dominated the Internet Service Provider market. But that was back when many folks feared the open Internet and dialed in to get connected. With the rise of broadband cable and DSL service (largely driven by the desire to download music and video), AOL is largely irrelevant. Google outbid Microsoft last year and bought a  5 percent slice of AOL for $1 billion.

Microsoft believed in its own dominance for too long. It made the mistake of trusting the hard drive and ignoring the Web-based server.

Microsoft’s core business still is large, cumbersome, feature-heavy, buggy and insecure software suites that sit on individual hard drives. It has done nothing to liberate the user from her desktop computer and capitalize on all the creative energy of Web-based creativity such as YouTube home videos, music mash ups, blogs and social networking sites.

In contrast, Google is the ideal model for these times. It free-rides on the work of millions around the world. It harvests and aggregates all sorts of content and positions targeted ads that match keywords and perceived interests of users. And it’s rolling out experimental Web-based applications like word processing and spreadsheet services.

Google does all this by investing in massive collections of central servers that make copies of everything we post on the Internet (including this article) and selling it back to us conveniently indexed and linked. Google ignores the hard drive and believes in the server.

Meanwhile, Google has built itself into the most powerful advertising and dossier-gathering company in the world. I am sure no government entity or company knows as much about me as Google does. And certainly no other company is as effective at targeting small, cheap ads by the thousands at me every week.

With the recent failure of its Zune music player and unspectacular rollout of the user-unfriendly Vista operating system, Microsoft now realizes that its advantages are not set in stone. It might fall as quickly as it rose.

So now Microsoft is fighting back. It’s not rolling out profound responses to Google’s ability to capitalize on Web culture. Instead, Microsoft is running to regulators. That might be a sign that it’s in long-term trouble. It’s at least a sign that it appreciates regulation better than it did in the 1990s.

In concert with — get this — AT&T, Microsoft is urging European competition regulators to review last week's Google-DoubleClick deal.

AT&T, of course, was the defendant in the 20th century’s most important antitrust case: the 1984 ruling that broke up the telephone monopoly into smaller regional telecom companies and unleashed massive innovation and competition for everything from the plastic jacks in the wall to the personal computer.

It’s safe to say that without the breakup of AT&T the Internet revolution would never have happened. We might have had an online communication environment. But it would have resembled the useless French Minitel system rather than the open, public, democratic and dynamic system we have now. AT&T would have controlled all the platforms, switches, standards, and protocols that would have routed messages through the system. And it would have been more powerful and sclerotic than Microsoft ever was or Google ever will be.

These two former robber-baron enterprises are now complaining that Google's $3.1 billion acquisition of DoubleClick unifies the two leading Web advertising companies and thus crowds out all smaller competitors.

Back when antitrust was new and through most of the 20th century it operated on the basic principle that too much power over a market was bad for society. American competition policy generally favored more firms rather than fewer, smaller rather than bigger and diverse voices in communication markets rather than a few loud ones.

Consider radio: In the late 1930s the new Federal Communication Commission issued ownership restrictions on broadcasters limiting how many stations they could own in a single market. The idea was to keep dominant voices at bay and allow smaller, locally owned stations to thrive. The effects were profound. Communities used radio to bind themselves and motivate themselves to improve their environments. And America gave birth to rock and roll.

We have forgotten those important lessons that helped America and the world accomplish so much and connect so many people. Since the Reagan administration antitrust has been out of style. Federal prosecutors and agencies rarely pursue obvious instances of excessive market power. They tend to focus on the price of products as the only indicator that a market is too concentrated. So they ignore other essential public goods like access to information and cultural richness and diversity.

Microsoft’s regulatory challenge to Google offers officials on both sides of the Atlantic a chance to rethink their competition policies in the world of information and communication. They can get beyond stale theories that undermine antitrust efforts and focus on doing what’s right for the public.

We need to keep an eye on emerging monopolists like Google just as we needed to rein in the last two decade’s monopolists: AT&T and Microsoft. Having governments go after those companies gave hope and opportunity to hundreds if not thousands of innovators and competitors. Thanks to appropriate regulation we live in a much better information ecosystem.

Siva Vaidhyanathan is an associate professor of Culture and Communication at New York University. His latest book is The Anarchist in the Library: How the Clash Between Freedom and Control is Hacking the Real World and Crashing the System (Basic Books, 2004). Siva blogs at .