Monopolies and Competition on the Internet A sample term essay with hyperlinks by Ted Goertzel         It is ironic that the issue of monopolization emerged on the Internet, because the Internet began as a decentralized, self organizing network with no centralized authority deciding what sites could be affiliated or what materials they could offer.  Recently, however, United States Justice Department filed suit against the Microsoft Corporation, alleging that it had illegally conspired to monopolize the Internet Browser market.   This dispute has been covered extensively in The New York Times and other newspapers.  The issue which triggered the legal dispute was Microsoft's insistence that computer manufacturers include the Internet Explorer browser with the Windows 95 operating system which was included with most personal computers.
    Microsoft claims that the government is seeking to restrict its rights to design products for a highly competitive and volatile marketplace.  Attorney General Janet Reno believes that the government is protecting the rights of smaller companies and innovators to compete freely.    On October 27, 1997, the Times published an article titled "The Justice Department v. Microsoft: The Evidence and the Answers" which summarizes the legal issues on both sides.  So far, Microsoft has been largely successful in protecting its interests, winning an important appeals court ruling in June, 1998.  The judges essentially validated Microsoft's legal position, asserting that "antitrust scholars have long recognized the undesirability of having courts oversee product design, and any dampening of technological innovation would be at cross-purposes with antitrust law," .  The government apparently does not intend to try to stop Microsoft from bundling the browser function within its Windows 98 operating system, which will be installed on most personal computers sold in the next few years.
    In terms of Ben Goertzel's theory of complex systems, this issue is an illustration of the tendency of complex systems to display both heterarchical and hierarchical principles.  In a hierarchy, simple structures are governed by more complex structures which grow up to control them.  In a heterarchy, structures are connected to other structures according to their own interests or needs, without being authorized or controlled by any third party.  The Internet is heterarchical by nature, any Internet site can connect to any other at will.  But there is a need for standardization to facilitate this, for someone to set the rules and create the software to make it easy and convenient.  In the early days of the Internet, this was done in a variety of ways, most of which were difficult to use and limited in what they could do.    Standardization has emerged largely through the dominance of large corporations which succeed in selling enough of their products to make them dominant in the marketplace.
    These dominant corporations play a useful function for the system by increasing compatibility.  If everyone use the same operating system, it is much easier for people to share files and software.  People can use computers at work or school or at the public library, then take the files home and work on their home computer.  As certain programs become more popular, there is increasing pressure on everyone to use those programs because more of the material they want to use is available in that format.  In economic theory, this is referred to as the phenomenon of network externalities.  This means that products become more valuable because everyone else is using them.  This subverts the competitive process because a product which actually may be better cannot compete because it cannot overcome the inertia of inferior but well established products.  An example is the Dvorak Keyboard which places the most frequently used keys on home keys so typists can type faster, when compared to what Jared Diamond called "The Curse of QWERTY" in a Discover Magazine article.  Despite the efforts of a dedicated band of enthusiasts, Dvorak has been unable to make significant inroads into the QWERTY monopoly, despite the fact that modern computers can be easily reconfigured to use Dvorak keyboards.  On Windows 95, for example, you just go to Control Panel and set the Keyboard to Dvorak.  There is even a choice of left and right-handed Dvorak.  The problem with learning to type in Dvorak, however, is that the human brain cannot handle two systems of touch typing at the same time, limiting the keyboards one can use at work, the library, cyber-cafes, and so on.  Many people think that Microsoft's software, such as Office 97, is successful because everyone is already using it, like the QWERTY keyboard, even though it is not be the best software available.
    An an article by John Cassidy in the January 12, 1998, issue of The New Yorker, titled "The Force of  an Idea:  What's Really Behind the Case Against Bill Gates" argues that Stanford Professor Brian Arthur came up with the theory of increasing returns due to network externalities despite the obstinate refusal of mainstream economists to acknowledge this defect in the free market system.  An article in Slate magazine by Paul Krugman, however, says that Cassidy's story is a myth, and that mainstream economists always knew about this phenomenon, which is inherent in complex systems such as modern economies.
    Many people in the Internet community believe Microsoft has achieved its dominance through evil, conspiratorial ways.   They post their arguments on The Official Anti Microsoft Home Page  and many other locations.  Microsoft responds with its own home page, arguing that it is just trying to provide better software to empower and enrich its customers.  Bill Gates argues that Microsoft's products succeed when they are better than others, and that Microsoft could easily lose its dominant role if it fell behind the competition.  It is true that not all of Microsoft's products are dominant in their field.  For example, the Microsoft Network has captured only a trivial proportion of the Internet Provider business when compared to the dominant provider, America Online, which seems to offer more of what mainstream America wants from an online provider.  Microsoft's operating systems won out against the technically superior Apple Macintosh systems because Microsoft made them more widely available at lower cost and with greater compatibility with older systems.  Apple has been plagued with management conflicts, while Microsoft has been better managed.  In my view, Microsoft has earned its success and has played an essential role in the develop of the high tech industry.