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Browser Wars II


HAROLD JAMES in PRINCETON


Ten years after its birth, Google is threatening to re-open the Browser Wars of the 1990's, when Microsoft's Internet Explorer eliminated its rival, Netscape's Navigator.

This time, however, it is Google's Chrome that promises to transform the economics underlying the entire software industry, and not only because of its technical innovation in linking very different kinds of software to an Internet browser. In doing so it eliminates the need for a program such as Windows, which previously controlled access to every kind of software.

Google's new technology is impressive, and will no doubt prove convenient for many consumers once the initial security problems are resolved. But the fundamental innovation lies elsewhere. Chrome is a breakthrough because it offers a completely novel approach to a dilemma created by the legal and regulatory regime of competition policy in the world's two major legal jurisdictions, the United States and the European Union.

Between 1995 and 1997, Explorer almost completely eradicated Navigator, although Navigator had initially opened up the World Wide Web for most users and its dominance appeared unassailable. The major advantage of Explorer was not so much a technical one, but rather that Microsoft's Windows provided the operating software for the overwhelming majority of personal computers. As a result, an Internet browser ? and, indeed, other media software ? could be integrated into the Windows framework as an entire software package.

The ability to have operating systems and software bundled together made life much easier for the average consumer. You simply got everything you wanted (and probably much more) with the purchase of a computer. But this also reduced the possibility of choice, of selecting and combining different software. Microsoft's critics have complained endlessly about this, claiming that the browser's integration into the operating system drove out inherently superior software solutions.

For instance, many users preferred the word-processing program WordPerfect to Microsoft's Word, but the ease of having a bundled solution meant that Word had the advantage of being used more widely, and thus drove its rival into extinction.

Microsoft's advantage, and its business model, goes back to another protracted legal struggle. Computer software was originally not a commodity to be bought, but a service. IBM built up a massively dominant position because it leased a carefully custom-designed and individualized package. It did not sell anything, computers or software. IBM's leasing model seemed to challenge the entire legal philosophy of US competition policy that was established in the New Deal era.

Google's position is so interesting and so powerful because the legal philosophy that challenges any ascendant position, even in an industry that seems naturally to produce monopoly, remains in place. Google's model is a neat example of what might be termed 'post-modern economics'. The amazing story of technical innovation is that it was, and remains, hard for innovators to benefit from radical technological breakthroughs. Industrial Revolution-era cotton makers in England did not make a great deal of money, even though their products revolutionized personal life and hygiene, and even extended life expectancy.

In our own time, air travel has become much cheaper, but airlines lose money, telephoning is no longer unaffordable, but the telecommunications companies lost fortunes by over-bidding for mobile telephony rights.

Google has taken the logic of loss-making technology to its ultimate culmination of not charging at all for its product.

Harold James is Professor of History and International Affairs at Princeton University. His most recent book is The Roman Predicament.



LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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