By Jeff Gould (Peerstone Research / Interop News)
I read in the Wall Journal the other day that the European Union is having another go at Microsoft. If you're thinking that this is, in the immortal words of Yogi Berra, déjà vu all over again, you would be right. Only last October the software giant finally gave in to long-standing EU demands that it unbundle the Windows Media Player from Windows and make its file server APIs easier for competing software to use. Microsoft also agreed to send a little folding money Brussels' way, to the tune of a $739 million fine. Curiously though, no one in Redmond seemed deeply chagrined at this outcome. For – wouldn't you know it? – while the lawyers and the bureaucrats dickered for nine interminable years in their own legal time warp, the rest of the world charged ahead. YouTube-style streaming web video came along and made media players largely irrelevant, while Novell's formerly dominant Netware faded into a quaint 90s era curiosity.

But the bureaucrats of the encroaching European superstate are nothing if not persistent. They have now opened a new investigation into accusations that Microsoft is still making life too difficult for competitors who want to interoperate with its software. The new investigation may or may not lead to formal charges. But if it does, we can expect another epic legal battle that may drag on for years.

Pardon my cynicism, but it doesn't matter very much what happens to the company that brought us the modern PC desktop experience. The stuff I use everyday – Windows, Word, Outlook, etc. – will continue to do just fine even if their maker is hit with another few billion dollars in fines. The likelihood that I will upgrade from XP to Vista sometime later this year will stay the same no matter how much money Microsoft ends up forking over to its legal team to fend off Brussels' crusading trust busters. No matter what havoc these faceless drones manage to wreak with Redmond's apparently never ending quest to beat its competitors in the software market, the planets will still ply their orbits and the world, for better or for worse, will generally remain the same.

Let's face it. Whatever the EU can dish out, Microsoft can take it. Sure, there may be some collateral damage. Another whopper of a fine and a new set of restrictions on what the company can and cannot do with its software might dent its ability to earn such big profits. Employees would lose jobs, shareholders would lose money. But other parties stand to gain from Microsoft's loss, so the overall outcome might be neutral or perhaps even a net positive. Such are the miracles of redistributive economic justice.

But who exactly stands to profit when the EU whacks an American company like Microsoft? According to the legal theory of antitrust, it is the consumer. That would be you and me. By bundling a free copy of its quite serviceable Media Player with Windows, Microsoft wickedly deprived us of the pleasure and utility of downloading a copy of RealNetwork's competing RealPlayer and possibly paying money to use it. By forcing Microsoft to offer an unbundled version of Windows in Europe, the EU believes that it has increased consumer choice. Personally, having already made the choice to purchase Windows, I would just as soon have my media viewing habits subsidized by the putative monopolists in Redmond than put up with Real's annoying pop-up ads. Of course, I would be upset if Microsoft made it impossible for me to install Real when I wanted to. And I would be furious if they tried to disable streaming media from YouTube. But they haven't done either of those things, because they are not stupid. On the contrary, as aspiring monopolists who spend a lot of time studying their customers, they know that if they went out of their way to make my life as a Windows user miserable, I could perfectly well pick up my business and migrate over to the Mac, or to a Linux desktop. And then where would their monopoly be?

What the EU doesn't get is what critics of capitalism never seem to get. The fundamental motor of flourishing free market economies is egoism, not altruism. And folks, this is a feature, not a bug. Greed may not be pretty to look at, but it sure gets the job done when it comes to motivating entrepreneurs to build better mousetraps. Yes, of course, Microsoft wants to stop other software vendors from gaining a foothold on the Windows desktop with third party media players, or from leveraging its own file server APIs to replace Windows Server with Samba or Netware. Like all the other greedy, self-interested companies out there that want to sell you software, Microsoft wants to maximize its profits. And it's perfectly willing to jam a few crowbars into the spokes of its competitors' wheels if it has to.

The EU looks at this normal market behavior and sees something pathological that needs reprimanding. The EU sees Microsoft doing everything it can to steer customers its way and decides that we consumers need protection lest we fall into the clutches of the evil monopolist, as if we were children. So it decides to step in and apply its greater wisdom by making choices in our place. What the EU doesn't get is that if consumers tolerate Microsoft's behavior it's because they have willingly chosen to do so. PC buyers and corporate IT department are not blind defenseless sheep. On the contrary, we have pretty sharp fangs and rarely hesitate to take a bite out of the hide of any vendor who fails to satisfy our needs. Just look at what happened to the IBM mainframe or those million dollar proprietary Unix servers. Those high-margin businesses used to be the backbone of enterprise IT spending, but now they are niche segments dwarfed in size by the vast market for low-margin Intel and AMD hardware running Windows Server or Linux. Neither the U.S. Department of Justice nor the EU brought this outcome about. It was achieved spontaneously by greedy upstarts like Intel, AMD, Microsoft and Red Hat who figured they could muscle in on the fat profits reaped by former enterprise server kingpins like IBM and Sun.

The new accusations against Microsoft did not of course materialize out of thin air. They are contained in a still secret complaint filed with the EU by an association of – wait for it – Microsoft's biggest competitors. This shadowy organization, rather misleadingly named the European Committee for Interoperable Systems (ECIS), has only ten members, nine of whom strangely enough don't actually come from the European Union. Adobe, IBM, Oracle, Red Hat, and Sun are American IT heavyweights. Corel and RealNetworks are second tier North American PC players. Tiny Linux desktop vendor Linspire is as far as I know practically defunct (they must have gotten a discount on the membership dues). Browser developer Opera is from Norway, which thanks to its oil riches has never seen fit to join the EU. Only mobile phone vendor Nokia hails from an actual EU member, Finland. This organization would be much more accurately named the North American League of IT Vendors Opposed to Microsoft (how does NALITVOM grab you as an acronym?).

But if these American vendors think it's such a hot idea for a bunch of unelected foreign bureaucrats to get involved in regulating the software industry, I wonder what they would say if the EU took a close look at their own business practices? I bet they wouldn't like it. Consider a few examples of what might happen.

Oracle makes a lot of money selling the shared-cache database clustering software known as RAC ("real application clusters") that it originally acquired from Digital Equipment. But as far as I know, Oracle requires customers who want to use RAC to buy its own (extremely expensive) database engine, and does not publish APIs that would let users of competing database engines such as, say, Microsoft SQL Server or IBM DB2 to run RAC.

Similarly, Red Hat Enterprise Linux is by far the dominant variety of enterprise Linux in the world today. While you can get a free RHEL clone from CentOS or pay for one from Oracle, if you want the real thing you have to buy a fairly expensive subscription from Red Hat which bundles automated software updates (Red Hat Network) with traditional help-me-figure-this-out support services. Many Linux users have expressed the desire to buy only the update service from Red Hat without the paid support, which they consider pricey and largely unnecessary (since they expect to handle most issues themselves). Yet Red Hat adamantly refuses to unbundle these two services, much like Microsoft declined to unbundle its Media Player from Windows.

Last but not least, there is the particularly egregious case of IBM, which promotes interoperability in the Windows and Linux space with one hand while with the other it revokes its long-standing agreement to allow interoperability in the mainframe market. While the media heaps kudos on IBM for its generous support of Linux and open source, Big Blue is quietly using patent litigation to throttle the business models of would-be competitors such as Platform Solutions and T3 Technologies. These pesky interlopers have had the temerity to combine clever firmware with Intel-based servers to run IBM mainframe applications for a fraction of the usual price.

Now personally, I think Oracle, Red Hat and IBM are jumping pretty ugly here. What they're doing is plainly calculated to maximize the revenue they extract from customers by throwing roadblocks in the way of would-be competitors. I think their actions reek of hypocrisy (aka marketing spin), particularly in the case of IBM. Having said that, I'm not sure I want some all-powerful governmental agency like the DoJ or the EU ordering them to stop this bad-boy behavior. In fact, I'm absolutely sure I don't want the bureaucrats to intervene. Rather than have clueless government lawyers write rules requiring Oracle to sell RAC as a stand-alone product and publish the APIs that would make it possible for other database vendors to use it, I would prefer just to let Microsoft bash away at the gates of the Kingdom of Larry with SQL Server, which gets noticeably better with each new version. Rather than force Red Hat to unbundle updates and support, I would suggest people just keep using CentOS like they always have and stop whining about the first open source software company to make money selling to the Fortune 500. As for IBM holding its upstart mainframe competitors' heads under water while preaching the virtues of open source and interoperability, I admit that's a style of business Michael Corleone could call his own. But I still think we should let IBM's customers decide whether they want to let IBM get away with it, or instead junk their mainframes and port everything over to a bunch of scale-out Intel and AMD quad-core boxes running Linux.

The free market is a self-policing system. Consumers rely on the self-interest of their suppliers to keep them honest, not charity. Letting governments pick the winners is a recipe for stagnation, because in their desire to please everyone governments will try to put the losers back into races they couldn't win on their own. We don't need the DoJ or the EU to keep us safe from Microsoft. IBM, Oracle, Red Hat, VMware and Google are already doing a pretty good job at that. All we need to do is get out of their way.