Taxing “the tax”

Italy! Finally someone is taking M$ to court over the tax it imposes on PCs on retail shelves. Consumers are being forced to buy a licence for that other OS even if they do not intend to run that other OS. Getting a refund from M$ or the retailer or OEM is very difficult and hardly worth the bother.

IMHO we should be able to go into a retail establishment and

  1. be able to choose an OS just as we do choose what brand/style of lightbulb we put in lamps,
  2. be able to know the price of the licence and support for the OS, and
  3. have the choice of no OS.

I recognize that most consumers do not want to install an OS so bundling an OS with a PC is necessary but it is also necessary to have a choice in OS or competition is absent from the market for OS. Many retailers will not have expertise to wipe an OS but that can be fixed. After they have wiped a few, perhaps they will realize they have to stock some no-OS systems and/or GNU/Linux systems. Something like 10% of purchasers will want to install their own OS so there is a market. On-line sellers have no problem supplying such machines. Why should other retailers be different?

Let us hope the suit succeeds and similar suits succeed in changing the face of IT globally. It is late but better late than never. I am ashamed of the Canadian government through its Competition Bureau endorses the tax.

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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4 Responses to Taxing “the tax”

  1. If A and B agree to sell product C for no less than $100 that is price fixing.

    If A agrees with M$ to sell that other OS for no less than $100 that is promotion.

    If B agrees with M$ to sell that other OS for no less than $100 that is promotion but A, B and M$ are price-fixing.

    What M$ is doing is price-fixing and the price-fixers do not have to be in the same room simultaneously. M$ sells to each re-seller so many licences at such and such a price and agrees to pay the re-sellers an amount for promotion. Since there is a single supplier, the wholesale price is pretty well fixed. Then the software is bundled with 86% of PCs shipped. The re-sellers/OEMs know they can sell the product no matter the price or quality. Naturally, they charge the customer roughly what M$ charges the OEMs so that in total the OS costs the OEMs nothing. That fixes the price at 2 X what M$ charges. The OEMs take the promotional monies as their profit on the sale of the licences and any other glorp that the consumer buys like apps, games, anti-malware, peripherals etc. It’s a racket.

  2. ray says:

    How can Microsoft have a formal agreement to fix its prices with itself?

  3. The reason Wintel is unresponsive to customers’ needs is that they have been able to ignore what the customer wants for many years because M$ suppressed competition. If you suppress competition you do not need to offer choice. Of course Wintel offers a myriad of choices as long as they are black. I believe Wintel is more than a monopoly, it is a cartel. They don’t fix prices as $X but M$ does push them into selling only that other OS and it negotiates a price with each “partner” so we get a range of prices but they are not based on competition because they all come from the same supplier indirectly. The customer is paying $100 or so for the OS instead of potentially $20 for GNU/Linux. All the partners take their cut just like the mob and no one talks out of fear. There is similar pressure to buy any processor as long as it is Intel. AMD gets some action but still has to be a partner of M$. The OEMs until recently have been very loathe to compete amongst each other with different processors and operating systems. They have started and there is a revolution in the empire around ARM. There is still a lot of pressure not to have ARM on “normal” PCs but that should change this year. The more sure that OEMs become that consumers will buy ARM the more likely they are to dabble but they are still terrified of being cut off by M$. M$ pays kick-back in the form of “promotion” or “training” and the margins for hardware are so tight that partners fall in line. As long as the OEMs put that other OS on all the PCs the market can absorb they are playing a safe game but a crisis will emerge in the coming year or two as ARM starts to take real share. We saw that in netbooks. Now that some are ARMed, and prices have fallen, demand has picked up. There is real competition in ARM and as the business grows we will see competition come to x86 again. GNU/Linux will thrive where there is competition. So will no-OS.

  4. Richard Chapman says:

    I know how it is. The last time I bought a car I had a hell of a time getting the interior changed from blue to gray. First I had to ask the salesman. Then he had to pick up his pen. Then he had to check the box marked “gray”. Some industries just don’t adjust well to change. Imagine that! Maybe Best Buy could learn a thing or two from that Nissan salesman.

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