Ho-Hum! Another Tech Industry Antitrust Lawsuit

December 17th, 2009

A friend and colleague suggests to me that the reason you have antitrust lawsuits is not to protect the public’s interests, but to give lawyers lots of highly-profitable work. While I understand the need to earn a living, especially in these troubling times, that comment raises the question whether anyone benefits from going after companies that are allegedly abusive.

Just recently, the European Union accepted Microsoft’s ballot box proposal, where customers would be able to easily select and install alternative browsers. That was designed to protect the unwary public in Europe from having Internet Explorer forced down their throats and conclude an antitrust action. While I am certainly in favor of freedom of choice, it does appear the marketplace is already speaking when it comes to browsers.

Consider that Internet Explorer, which once held an over 90% share, is now down to approximately 60% overall without ballot boxes. That means that 40% of Internet surfers have decided to let their fingers do the walking and they have selected Firefox, and in lesser numbers, Google Chrome, Apple Safari and Opera. It doesn’t appear that the tepid updates to Internet Explorer have been able to stem the tide, just as Microsoft’s new Bing search engine hasn’t halted Google’s growth path.

This isn’t to say the ballot box concept is bad. But it’s restricted to the countries that are part of the EU. As far as the rest of the world is concerned, they still have to make their browser voices heard the old fashioned way. You have to wonder that if this idea is such a good one, why wasn’t it expanded to the rest of the planet? What about the authorities in the U.S.? Oh yes, they ave. already settled with Microsoft, and that wasn’t an option they considered. Oh well, maybe they need some new lawyers to enter the fray and devise some new schemes on billable time.

That takes us to Intel. After agreeing to pay off rival AMD to the tune of $1.25 billion, including legal fees of course, to end a lawsuit, up comes the U.S. Federal Trade Commission with their own wide-ranging complaint.

According to the FTC, Intel has engaged in all sorts of illegal trade practices that, among other ills, prevent customers from benefiting from better graphics chips and hence higher-performing personal computers.

Is any of this relevant in the real world?

Well, consider the state of Intel’s integrated graphics. Apple used to ding PC makers when they built products with what they regarded as inferior graphics capabilities. That was until lesser-priced Intel-based Macs were outfitted with the very same chips.

Now to be fair, basic 2D graphics performance was fairly decent with those chips, until you decided to try a little gaming. Then anything beyond a basic app would choke the graphics processor. Apple’s solution was to replace Intel’s integrated graphics with the NVIDIA 9400M, which has proven to be a revelation. Even the cheapest Mac mini has become a decent performer when it comes to modest gaming, even though you sacrifice some of your built-in memory for display purposes.

However that design may be an endangered species. It has been reported for months that NVIDIA and Intel are embroiled in a licensing dispute over whether those graphics chips can be used with newer Intel CPU designs. Intel says no. NVIDIA says yes, but unless a contract is signed it won’t happen.

Part of that ground is evidently being covered by the FTC action, so if it’s successful, it may well be that the 9400M and its successors will continue to be used in low-end Macs. If not, Apple will be forced to choose inferior parts from Intel, or go to discrete graphics, which will increase production costs somewhat. In the end, if Apple picks the latter, it means lower profits, or a higher retail price. In other words, you pay for Intel’s refusal to continue to license its chip designs to NVIDIA.

There have also been reports that Intel might also be using that strategy as a wedge to force NVIDIA to sell out to them. Up till now, Intel was rated dead last when it comes to graphics chips prowess. This would give them a great opportunity to build a quality product portfolio and perhaps dominate the market even further at the expense of AMD and its ATI subsidiary.

Now if this is Intel’s strategy, I don’t like it. A company shouldn’t be forced to sell out because of such draconian measures, particularly when it involves a dominant player in an industry. While I’m not fan of government intervention, I am also not in favor of using corporate muscle in a way that ultimately hurts customers by restricting choice and perhaps forcing them to pay more for what they buy.

On the other hand, if the past is a guide, Intel will have its high-priced legal eagles thrust and parry to get the best deal they can, after delaying the proceedings as long as possible. So maybe the customer will benefit somewhat in the end with superior products at a lower price. But it’s also possible any settlement will have, at best, a token effect, except for the huge paychecks those lawyers receive.

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9 Responses to “Ho-Hum! Another Tech Industry Antitrust Lawsuit”

  1. Andrew says:

    Intel graphics are lousy for gaming, but there is more to GPU performance than framerates.

    My wife has my old BlackBook with GMA X3100 intel graphics. It is a lousy gaming machine, but battery life is terrific and the thing runs very cool. Over on the unoffical ThinkPads forum enthusiasts hold Intel-graphics connected to high-res displays as the holy grail of business models, as they run cool, get phenominal battery life and are extremely reliable (ThinkPad T41, T42 and T43 models had problematic ATI chips).

    The 9400M performs far better, as evidenced by my ability to play Doom 3 on my MacBook Air, but I wonder if that increased performance comes with an increase in heat and power use.

    • @Andrew, I don’t think anyone is complaining about either heat or battery life on the Macs that use the 9400M. I suppose the product specs would have this information, but it’s probably not too significant in either case unless the chips are stressed.


  2. DaveD says:

    What Intel is doing by bolting their graphics processor onto the single chip package is like what Microsoft did with Internet Explorer in Windows 98. Microsoft made IE the browser of no-choice for Windows 98 users. However, there is more in the FTC action than the graphics processor, a what-I would-call slush fund or loyalty payments to PC makers that would only use Intel chips.

  3. dfs says:

    Personally, as an end user I don’t object to Intel’s business practices, because their processors are so excellent that I don’t feel that I’m being hurt by whatever they may be doing. I wouldn’t object to Microsoft’s either, if their software worked as well or better than those of the competition. MS only bothers me when they foist on us shoddy products and strange proprietary standards that defy industry-wide ones. And there may be sound technical reasons for “bolting their graphics processor onto a single-chip package” that actually work to the end user’s benefit. As far as I am concerned, not being a lawyer, antitrust regulations should only kick in when the end consumer is materially hurt by a corporation’s business practices. They shouldn’t be used to punish a company for being better than its competition and to protect second-raters against the natural consequences of being mediocre. That only works against the public interest. I can’t see that Intel is doing anything that prevents the public from getting enjoying the befits of better processors than they themselves are making or making the price of their chips and the computers that use them unreasonably high.

    • lucidthinker says:

      In this case, people ARE being hurt in the sense that Intel is trying to lock out a superior product in the form of Nvidias graphics chips vs. their own integrated graphics chips.

  4. Andrew says:

    I agree with Gene on the ballot box not being needed. I use both Mac and Windows, and have no problem using whatever browser I want on either platform. I like Safari and use it on my Macs. For Windows systems I prefer Firefox, only because scrolling doesn’t work so well on my ThinkPad’s eraserhead mouse with Safari, but do use Safari when the ThinkPad is docked with an external mouse.

    Even IE has its place. It is nowhere near the fastest browser, but speed isn’t everything. IE 8 does a wonderful job of printing pages that mix graphics and text.

    If I had to choose one browser for both platforms that would be a very difficult choice. Fortunately, I don’t need to use a ballot box and whatever choice I make, only need apply that given browsing session.

  5. Karl says:

    It’s a tricky situation no matter what. I like the idea of educating the end user that they don’t have to use this browser or that browser. I think the end user has a responsibility to seek knowledge, but I also think a helping hand isn’t necessarily wrong.

    While I’m not fan of big government, I’m not a fan of big business either. I feel the government should step in when needed. But the argument is, and always will be, who decides when stepping is needed and how much. I can vote with my ballot or vote with my dollars. That is really the only power anyone has.

    The EU ended up hurting Microsoft and helping Firefox, Apple and Opera. Is that good or bad? EU thinks it will be a good thing. I think it could end up helping Microsoft build a better browser, so does it end up helping Microsoft in the long run?

    It’s a tough situation all around.

  6. dfs says:

    It at least used to be worse than that: MS used its own proprietary html code, and marketed page-creation software that used it, so that pages created their way did not display properly on browsers other than IE. That was their strategy for winning the “browser wars” and dominating the market (how exactly this was supposed to generate revenue was something I could never figure out, but I’m sure they had something in mind). Fortunately this turned out to be a failed strategy and only managed to earn Microsoft a good deal of ill will. (But if you want to see some terrible MS code even today, create a document in Word, then do a Save as HTML and look at the resulting code, which goes to show that MS still doesn’t Get It when it comes to the Web).

  7. rwahrens says:

    I think that the empirical evidence after a year of this ballot box will be interesting.

    How much of a difference will it make in browser usage in the affected countries vs. the rest of the world?

    Personally, I think it’s great that 40% of users have actively decided to choose a different browser than IE. But how many of the 60% would also have chosen otherwise if they had had an easier way of both knowing that there WAS a choice and how to get it installed? So many people just blindly go with what’s there, and this was the argument of the prosecution – that MS just intended to make it harder, if not almost impossible, for users to even be able to make that choice (much less even know they had one).

    So let’s wait a year and look back at the numbers to see if the ballot box makes a difference.

    I’m betting that it’ll make a BIG difference.

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