In my view, Floyd Norris is the best business writer for the NY Times. Today, Mr. Norris has this column in which he analyzes the dilemma confronting anti-trust regulators in dealing with Microsoft’s bundling policies. Mr. Norris notes:

For antitrust regulators, the heart of the problem is the changing nature of the personal computer market. Consumers do want new features, as Microsoft says, and they do want them bundled in. Any nonexpert who has ever tried to download and install a program would much rather have it done by someone else.
But Microsoft’s pattern has been to wait for others to pioneer a computer application and then to put out its own program. If that program is eventually bundled as part of the operating system in all new Windows computers, the first arrival screams foul, but in the end Microsoft wins.
Netscape pioneered Internet browsers but was left in the dust. RealNetworks, which led the way in music software, could face a similar fate. It is not easy to make money off a product that consumers must install themselves when the consumers already own Microsoft’s version, which comes already installed.

In short, the issue is between simplicity and innovation. The public demands simplicity, which Microsoft provides for a generally reasonable price. But in doing so, Microsoft may deter innovation through its policy of bundling every concept into Windows and then, might we say gently, throttling threats to its dominant position.
Microsoft and others are pursuing the market for the “Multimedia PC” that integrates television, DVD player, stereo system, and other entertainment equipment. Microsoft is huge, so it’s obviously a serious player in this competition. But proper application of antitrust law should neither prejudice Microsoft’s development of the technology nor allow Microsoft to undermine its competitors, as it has shown that it is willing to do. Striking the right balance in that application is a formidable challenge.
Mr. Norris also makes another interesting observation:

. . . the risk is that Microsoft is becoming the functional equivalent of an old-style utility, with extensive government regulation that could even extend into determining what products it sells and at what prices.
There are worse fates than running a regulated monopoly. But such stocks are not the type that appeal to traditional technology investors, and the prospect of such an outcome may be one thing that has been weighing on Microsoft’s share price, which has underperformed the market badly over the last 18 months.

Thanks to The Sports Economist for the link to Mr. Norris’ article.