As we have seen, compatibility between the different parts that make up a product and between different products is essential if we are to make them much more functional. Hence, it is important to establish standards that will allow us to make products compatible with one another.
Very often, standardisation comes about when the format of an essential part of a system is adopted by everybody. This essential part that marks the standardisation process is sometimes called a platform.
These standardisation processes are sometimes the result of the work of bodies set up for the purpose of defining these standards. They can be state or supra-state bodies, or created by members of the industry.
In software, different standards are established for any given procedure, such as all communication protocols governing the transfer of information on the Internet.
Other times, however, a company from the industry controls a portion of it.
Sony and Phillips
These two companies were able to impose their technology for producing compact discs through the force of circumstance. As a result, all record labels now distribute their music on this digital format, all music devices are designed to play them, etc.
In software, obviously, the prime example of a platform in the sense we have explained is the Microsoft Windows operating system, installed on the vast majority of computers, both personal and servers.
It is important to understand the interests that guide the owner of a product that has been transformed into a platform in one way or another. In particular, we will look at the interests behind the policies of compatibility between its product and products that complement it (policies of compatibility within a platform) and with products that are its potential rivals (policies of compatibility between platforms).
Within a platform, a broader range of applications can make the platform more valuable in two ways: customers get more out of the platform – and are thus willing to pay more – and the application creators in turn will see more business opportunities (as there will be a larger potential customer base). As a result, they will make applications to run on this platform, which will attract more clients, etc., creating a virtuous circle that will encourage the dissemination of this product.
Thus, more applications complement the platform and make it more valuable. In theory, the platform sponsor should be interested in opening it up to application developers – indeed, Microsoft often argues that it has an open policy because it shows the parts of the Windows software code (APIs) that application developers need to know for their products to work with Windows.
However, the founder will have conflicting interests:
1) If it also has applications offering good performance, it will want to weaken the performance of competing products and – in the worst case scenario – even make them incompatible with its platform.
2) It may also be concerned that some applications may subsequently become new platforms around which the other applications will develop without depending on the platform that it controls.
Microsoft and Java
This is what happened to the Netscape browser and Java programming language: Microsoft carried out anti-competitive policies against this software because of concerns that it could develop and replace Windows as the software platform for PCs.
To some extent, this gives us an indication of the behaviour that we could expect of the owner of a platform established as the de facto standard when faced with other products that could steal away its privileged position, as we will now discuss.
We have seen above that, due to switching costs, the share of customers accessible by the company that controls the platform can be a barrier to entry for rivals, when there are network effects, if the company does not make its product compatible with those of its rivals. Naturally, it is not only the rival companies that lose out with these anti-competitive tactics but society as a whole, since the options from which to choose are instantly reduced, and ultimately, so too is the quality of products available, because fewer companies are prepared to spend resources on innovation and product improvement.
The best-known example of this kind of behaviour is that of Microsoft with its two flagship products: the Microsoft Windows operating system and the Microsoft Office office automation package. Microsoft clearly does all it can to avoid compatibility with other platforms (particularly with the GNU/Linux operating system, for example). In the same vein, Microsoft has systematically pursued a policy of non-compliance with various standards established by the computer industry by developing its own version of the standard and failing to document the changes it introduces adequately. Very often, when programs and applications apparently do not work properly, it is because the platform does not meet the standards adopted by the industry.
The conflict between the various authorities representing the interests of society (both in the United States and the European Union) and Microsoft basically concerns this purposeful manipulation of the process of standardising a technology, altering the capacity for communication and interoperation between different information platforms.
We will now briefly discuss some public policies that can promote the proper functioning of software markets, particularly those that allow free software to compete with proprietary software on equal terms and as a valid and viable alternative in cases where the proprietary software boasts the advantage of already having an established mass of users.
Defence of competition
First and foremost, governments must guarantee fair competition in the software market.
The chief action of the competition authorities should be to ensure that no artificial incompatibilities are created (i.e. ones that do not have a technical explanation) between different technology platforms.
The current conflict between the European Commission and Microsoft boils down to the latter's manipulation of the degree of compatibility between different products by altering the capacity for communication and interoperability across different software platforms, in this case, communication between the operating systems managed by servers and those managed by personal computers.
The European Commission is asking Microsoft to make the information protocols of the Windows operating system available to everybody (particularly computer server manufacturers and programmers) so that the other operating systems can be made compatible with this system, i.e. so that all other operating systems can communicate and interoperate with servers running this operating system.
Naturally, Microsoft's aim is to exploit the fact that the Windows operating system is already widely implemented by artificially raising the costs of switching to another software for its customers.
Policies for the adoption and support of free software. Enforcing compliance with the standards
We have seen the importance of network effects in ICTs and the need for software to have a critical mass of users in order to be viable. Through these network effects, large companies can exert their leadership over the implementation of free software. If the government and major corporations (in their own interests or as a service to society) promoted free software in their organisations, they could create a sufficient critical mass for the population to consider the use of free software more accessible.
Much of the proprietary software used today in these organisations could easily be replaced by free software with similar or improved benefits. The only obstacle is the switching cost for individual users because of the lack a sufficient critical mass.
The network effect of this policy in these organisations would be significant, particularly the indirect network effects that would be generated: if these large organisations were to acquire free software, this would create an important source of business for IT companies whose business model is based on free software and the provision of IT services to complement its implementation.
In all events, these organisations must first undergo a process of software acquisition requiring compliance with certain protocols and compatibility standards. If the government, for example, were to establish procedures for the acquisition of software and appropriate computer services, this would probably require the creation of a public agency to advise the various government departments. These agencies could implement different mechanisms to promote the use of free software in government bodies.