The Cost of Software Monopoly

The Cost of Software Monopoly

July 25, 2005
Executive Summary
Source

Over the past decade, the personal computer industry has seen a major reduction in competition in the operating system platform market. A computer operating system platform is the software which computer users learn to operate their computer with, the software that independent software vendors develop applications for and the software that third-party computer hardware developers create compliant hardware for.

Competition in the desktop computer operating system space is practically non-existent, with one platform from a single supplier commanding a very high proportion (over 95%) of the Australian market. This single platform from a sole vendor is Microsoft Windows.

Cybersource believes that a sizeable portion of this market share is due to the fact that over many years, most consumers were never given the option to acquire alternative operating system platforms. Instead, Microsoft Windows was always bundled with most vendors' computer products, whether consumers wanted that bundled product on not.

We have seen that the Australian Competition & Consumer Commission (ACCC) has acted in the best interests of consumers to increase competition in such areas as telecommunications. Cybersource wants to see similar actions introduced in the computer operating system platform space.

In the software market, as in the telecommunications market, a single, powerful and well-leveraged vendor can cause the reduction of real competition and the corralling of almost all consumers into a single monopolistic platform situation. This causes significant reduction in choice, price competitiveness and innovation. Cybersource calls upon the ACCC to rectify this situation for the benefit of the local Information Technology industry and of all Australian IT consumers.
Key Points

1.
It is impossible or extremely difficult for consumers to purchase a desktop PC or laptop from a tier-1 or tier-2 computer manufacturer without also having to purchase an OEM copy of Microsoft Windows operating system platform.

2.
Cybersource believes that this greatly reduces choice for consumers and competition for the industry. Such a reduction in choice, and consequent reduction in competition, costs the Australian economy hundreds of millions of dollars annually, through paying one vendor needlessly high prices for monopolistic products.

3.
The computer market is many ways similar to the telecommunications market. When one vendor has over 95% of the market, that vendor should be bound by a universal service obligation to ensure that all consumers can access the content, documents and data which reside on that vendor's platform. Neglecting such an obligation hinders all consumers and third-party developers not using that vendor's platform, further increasing anti-competitive pressures.

4.
Cybersource believes that such anti-competitive practices should be stopped as soon as possible, through remedies introduced by the ACCC, to secure both a broader competitive base and increased options for consumers.

5.
The first remedy that Cybersource seeks from the ACCC is that all tier-1 and tier-2 vendors should be required to offer their desktop and laptop products without an operating system pre-installed, that this choice be presented to consumers as broadly as the products themselves are, and that the price difference between the with and without operating system options should also be clearly and broadly presented at retail outlets, on vendor marketing literature and vendor websites.

6.
The second remedy that Cybersource seeks from the ACCC is that Microsoft should be required to offer unfettered and unencumbered access to all major content, document, data and applications formats which could enable interchange and interoperability between users of its platform and users of other alternative platforms.

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