Prevent OS bundles by OEMs?

By Lewis A. Mettler, Esq.

What would happen if OEMs were required to itemize the cost of the OS if included in the system price AND required to sell the same products separately at those prices?

Microsoft has said that a new license for 98 is around $200 and an upgrade is around $100.

Could OEMs be required to quote the portion of the system attributed to the OS? Would that mean they would reduce the cost of a new system by $200 if the customer wanted to buy without an pre-loaded OS? Or, perhaps only $100 less if the customer could prove an upgrade price was called for?

Well. What would OEMs do? If they sell an upgrade OS separately, then they would have to add that same price to any system when pre-loaded. If they sell a new license for $200 then they would have to add that same price to any system with the OS pre-loaded. (Actually, the system without the OS should be priced less than the OS amount, since the cost to the manufacturer is less. Tossing the OS in the box costs less than pre-installing and tossing the CD in the box.)

What does Microsoft do now? Microsoft charges a lot less per system for pre-loads. So much less that no OEM is encouraged to market any system without it. This blocks out the market for all competitors. Almost completely. What would happen if OEMs were required to itemize the OS cost and offer to sell the parts independently?

First, the cost between an upgrade and the OS on a new machine would equalize for a particular customer. If the customer were truly buying a new machine, then the differential price would be around $200. If OEMs do not like the $200 figure, then they should sell the OS by itself at whatever price they pick when pre-installed on a machine. NO difference.

This would reduce the affect of Microsoft blocking out competing products simply do to OEM agreements and favorable pricing on pre-loads. Microsoft would get the same for software sales and pre-loads and all customers would have the choice of a less expensive system is it did not come with software pre-loaded.

This would also result in a lower price for the OS on the shelf (not included with a system).

Would this allow competition in the OS marketplace for Pcs?

Lewis A. Mettler, Esq.