The Microsoft corporation has repeatedly been accused of having a monopoly on the software market. Individuals fear that if the company controls too much of the market share, it will be able to do whatever it pleases; from raising prices, to using excess capital to branch into even more areas. The practices of Microsoft are not unique, however. Evidence of monopolies can be seen throughout the history of the computer industry and the field of business in general. By understanding how other corporations made their rises to power we can better understand what will happen with Microsoft and perhaps avoid the social consequences that our nation has endured through the monopolistic practices of other businesses.
In 1975, Microsoft came into existence. It was not until 1981, however, when they licensed an operating system from Seattle Computer Company, that their explosion into dominance began. When Microsoft first started, hundreds of smaller companies were working on similar projects. Eventually, however, these companies ran out of money, were bought out, or simply failed. In the end, Microsoft stood strong, absorbing more and more of the market share as each of these other companies went belly up. MicrosoftÕs beginnings are quite analogous to the start of railroad development in 19th Century America. Soon after the idea of using railroads for transporting goods and passengers was introduced, dozens of small companies began construction. Though thousands of miles of tracks were lain, no one path was longer than a few miles. Then, larger companies began buying up the smaller ones, creating even larger corporations. By the time the transcontinental railroads were being built, only a few companies were doing the construction. Similarly, once Microsoft assumed dominance in the Operating System field, few other companies bothered to challenge their supremacy.
One way that a company can become a monopoly is to control an aspect of the industry that is absolutely indispensable, given the nature of the market. For example, for nearly forty years, International Business Machines (IBM) controlled the computer hardware market. Since they had dominance over the hardware, institutions (mainly the military) that wanted to commission a project had to do so with IBM. With the advent of personal computers, IBM licensed its operating system to Microsoft. Since IBM had long ago set the standard for hardware, new companies modeled their products after it. To do this, these companies also had to use the Microsoft operating system. Only the development of new PCs eventually removed IBM from dominance.
Once Microsoft controlled the operating system market, it was free to branch out into other fields, such as spread sheets and word processors. By making these new software packages work best with their operating system, Microsoft again ensured dominance in the field. These practices are quite analogous to those of the railroads. After the realization of the potential of the railroads in business, the major companies that built them assumed dominance of the railroad industry. For example, farmers in the West were absolutely dependent on the railroads for transporting goods to outside markets. Consequently, railroad owners could charge whatever prices they wanted, knowing that the farmers would be forced to pay the exorbitant rates. Once the large corporations had control over the transportation industry, they began to branch out into related fields. Steel mills, oil refineries, and grain elevators were all bought by railroad companies. By controlling every level of the creation of railway system, large corporations ensured that they would maintain their dominance. Similarly Microsoft, by controlling all of the major software used by individuals, has ensured that they will not be replaced by competition.
Monopolies are not new phenomena: Throughout business history, corporations have achieved complete dominance over a wide array of industries. Whether it is Microsoft and the software industry, IBM and hardware, or 19th Century robber barons and railroads, certain companies have been able to control nearly all of the market share of their respective fields. Are these practices ethical? Should large companies be controlled by the federal government, or should we assume a laissez-faire attitude with them? Perhaps by allowing one company to control all aspects of a field we will ensure harmony and uniformity. But does this uniformity come at the price of stifling competition?