During the late 1800s, computer technology began to be developed in the United States--but this involved analogue computing, rather than the digital computing of today. A major reason for the development of this technology was the census which the Constitution requires be conducted every ten years. The expanding population, and thus the vast amounts of statistical data involved in this process, necessitated the development of these devices to assist in the task.

However, it was not until the Second World War that electronic digital computers were developed--mainly for the purpose of breaking military codes. After the Second World War, large-scale mainframe computers began to be introduced commercially. At first, there were several companies producing these large computers. However, because IBM already employed an extensive network of sales representatives for its adding machines and other business equipment, it was able to gain much success in offering large-scale mainframe computers to America's major corporations. By the late 1950s, IBM's overwhelming dominance was generally recognized, and the other computer manufacturers were only able to maintain specialty markets or niche operations, such as scientific computing. The situation at the time was characterized by the epitaph "Snow White and the Seven Dwarfs."

There were a number of ways in which IBM maintained near monopoly control of the market. At first, IBM did not sell its computers; it rented them. These were very expensive machines and, along with the computer, an IBM engineer was usually stationed at the customer's site. These became known as Customer Engineers. It was only after court action that IBM began to sell its computers.

Another practice that IBM used to maintain its customer base was bundling. It would not only provide the hardware, but also the software--all as a single package. As a company became dependent on this software, it could only use IBM equipment to upgrade. If a company wanted to use a computer built by another manufacturer, it would have to invest in a totally new software system.

IBM also attempted to control the equipment used in conjunction with the computer itself--i.e., the peripherals. The connections IBM used between the main computer and the ancillary devices used in conjunction with it--such as tape drives--were very complicated, making it difficult for other manufacturers to produce this equipment.

IBM's attempt to control the industry caused other manufacturers to suggest that it was engaged in unfair business practices. A particularly notorious example of this was a case in which another manufacturer developed a new computer with better capabilities. In response to this, IBM announced it was developing a similar computer. Customers waited for the IBM product to be available, and did not buy the competitor's model. After a time, it became evident that IBM was not going to produce the new type of computer. However, by this time, the competing company had lost out in terms of needed sales.

Because of such tactics, IBM was sued a number of times by competing companies. The Johnson Administration also initiated an antitrust action against IBM. However, this complicated suit was dropped by the Reagan Administration. Although IBM did lose a number of the antitrust actions brought by competitors, it still maintained dominance in the mainframe computer industry through the 1980s--and beyond.

In the early 1980s, the personal desktop computer was introduced. Unlike the mainframe computers, for which software was usually supplied by the hardware manufacturer, the personal computer counted on much of its software being written by third parties. It was therefore not possible for IBM to maintain the tight control over the personal computer market that it had over mainframes. In order to encourage independent vendors to develop software and ancillary hardware (peripherals) for their computers, IBM decided to allow other manufacturers to make personal computers similar to the ones it was producing. It therefore created an open specification, thus allowing many clone manufacturers to develop.

Microsoft had developed the operating system for IBM's personal computers. Its DOS (disk operating system) was used on all IBM personal computers, as well as on most of those produced by IBM's competitors. Similarly, IBM depended on Intel to produce the processor which ran its personal computers. Intel chips were used by most other manufacturers as well. As the 1980s progressed, IBM began to lose a market share in the manufacture of PCs to the various clone makers. Microsoft and Intel, however, continued to provide the operating systems and processor chips, respectively, for most PCs--whether produced by IBM or one of its rivals.

In the early 1980s, Apple introduced a desktop computer of its own, and decided to keep its software and hardware proprietary--that is, not allow other manufacturers to copy its system. In 1984, Apple brought out the Macintosh, a computer which employed a graphics user interface (GUI) that was much easier to use than the command driven system used on IBM compatible PCs. Many of the ideas for this interface had been developed earlier in Xerox's research laboratories, but was not marketed by them.

Because Apple kept its Macintosh hardware and operating system proprietary, it had more difficulty in attracting third party vendors to develop software for it. As a result, the Macintosh only gained about a twenty percent market share. It tended to be used most often for graphics and desktop publishing applications, and in K-12 education. It did not catch on in the general business community, as had IBM and compatible machines for which there was a great deal of business software available.

As for IBM and its non-proprietary strategy, it too lost out as other companies produced computers that were compatible with its PC. IBM tried to regain control of the situation by introducing a new line of computer, the PS/2, and its own operating system, OS/2. However, the PS/2 failed to capture much of the market, and the OS/2 did not gain as large a scale of success as IBM had hoped. As far as the PC market is concerned, Microsoft has maintained its dominance in system and application software, while Intel has held a very good market position as a chip manufacturer.

In order to provide a graphics interface for PCs and to introduce more advanced features, Microsoft developed Windows as an alternative to DOS. This operating environment has become very popular, and most software which was written for DOS was ported to Windows. At this time, Windows has become the operating system used on most IBM compatible computers. The attempts by IBM to offer OS/2, and the efforts by some other companies to introduce their own graphics user interfaces, have largely failed. Today, most would agree that Windows has won the desktop operating system contest on PC compatibles.

For its part, the Macintosh operating system has remained very popular among its devotees, and Apple is now attempting to license the Macintosh operating system for use on computers manufactured by other hardware companies. This effort will be enhanced with the use of the Power PC chip which has been introduced by IBM and Motorola; it is already in use in the Macintoshes being released today. However, Microsoft may introduce a version of Windows for the Power Macintosh. If it does, independent software vendors would not have to write both Windows and Macintosh versions of their software, and Microsoft may win out--even on the Macintosh. This, of course, has great implications for business concentration and public policy in the computer industry.

The real battle today is which operating system will gain a stronghold on networks, and on the set top boxes which will be used in conjunction with the digital television being introduced today. At the present time, there are several contenders in this field including Microsoft, Apple, IBM, Novelle, Oracle and others.

Although, for the most part, the computer industry was never as regulated as the telephone and television industries have been, this situation is changing today, as all three technologies converge. For example, AT&T was at first not allowed to enter the computer industry. It was only after it was forced to divest itself of its local telephone operations that AT&T was allowed, after a time, to enter this market--but has not been very successful.

As noted, Microsoft has already become the dominant player by far in computer software. Some in the industry feel that it is pursuing noncompetitive practices, especially because it has advanced knowledge of the features in the new releases of its operating systems and can use this knowledge to produce applications software with new features earlier than rival companies. For this reason Microsoft has been under investigation by the Justice Department for antitrust activities, although so far Microsoft seems to be winning most of the disputes.

In order to compete with Microsoft, there has been some consolidation in the computer industry. Novelle merged with Word Perfect, but later sold the word processor to Corel. IBM has purchased Lotus. Borland, for its part, has bought out Ashton Tate with its dBASE data base software. Thus the question of market concentration and monopoly control is becoming a major factor in the computer software industry, as it is in the other industries we are discussing.