By Arnold Kling
The issue of bundling has been in the news recently. For example, the Europeans want to punish Microsoft for bundling a media player with its operating system. Professor Bainbridge supports the regulators in this case.
Prohibiting Microsoft from bundling, say, media players and search engines into the Windows operating system is critical to preserving competition and promoting innovation.
Also, Congress is considering forcing cable companies to unbundle their channel offerings.
Committee Chairman John McCain (R-Ariz.) peppered Cox Communications Inc. President James O. Robbins, asking the head of the nation’s fourth-largest cable company why consumers have to pay for channels they don’t want. Robbins’s answer: Giving consumers that degree of choice would cost too much.
Suppose that we adopt the position that everywhere there is bundling, the government should step in to regulate product offerings and pricing. In that case, it seems to me that we might as well abandon capitalism and go for a complete command-and-control economy.
Is it wrong for an operating system to come bundled with a media player? Then why is it not also wrong for a car to come bundled with a media player (i.e., a radio)? Is it wrong for two cable channels to be bundled? Then is it not also wrong for CNN to have a bundle that includes Lou Dobbs and Larry King, given that some people want to watch one but not the other?
Bundling is everywhere. Phone plans that offer flat rates rather than by-the-minute pricing? That’s bundling. Computers that are sold complete with monitors, keyboards, and speakers? That’s bundling. Cell phones that are sold with cameras and WI-FI? That’s bundling.
Regulators could argue that bundling by Microsoft or the cable companies needs to be regulated because those companies have monopoly power. But I would rather see product specifications and pricing set in a market, however imperfect, than set by a government bureaucrat. At best you are exchanging one uncompetitive decision process for another.
I do not see any way to preserve the free market system if you decide that bundling provides a rationale for regulation.
For Discussion. Of all of the potential ways in which monopoly could be harmful, how important is bundling?