THE MICROSOFT AGREEMENT : Harnessing the Software Genie : Regulation: More battles are in store between government and software makers as the information revolution evolves.
The Justice Department may have trimmed Microsoft Corp.’s sails in the personal computer business, but as the information superhighway takes shape, the software battle is already shifting to new fronts--presenting the Clinton Administration with tough new challenges.
Microsoft, IBM, Novell, Oracle Systems and other rivals are pushing to supply and control the software that will set industry standards for networks of computers, the delivery of movies and interactive cable programming, wireless personal communicators and other futuristic electronic communications devices.
The battle to establish standards for these systems will test federal antitrust and communications law, as well as the Clinton Administration’s commitment to modernizing the information superhighway. That’s because these emerging technologies will touch nearly every American--not just home computer users--and therefore prove to be more central to the nation’s economic, social and political life than virtually any product that has been examined by federal regulators thus far.
“What Microsoft and other computer companies have in mind--as well as cable companies and the regional Bell operating companies--is a product for the mass market,” said Michael Wirth, a communications professor at the University of Denver who has written widely about mass media and public policy. “If in fact they achieve that market penetration then we are obviously talking about a much more impactful system than the personal computer.”
Officials from U.S. Commerce Secretary Ronald H. Brown and Vice President Al Gore to President Clinton himself have made development of the information superhighway a major priority. And they have said that the computer industry is a critical part of the effort to modernize the nation’s data networks so that U.S. industry can produce more jobs and remain globally competitive.
But industry executives have countered that they must be allowed to make alliances and joint ventures in order to raise the huge amount of capital needed to create new computer software, lay higher capacity fiber-optic cable and make other upgrades.
The quandary had placed some companies, such as Microsoft, at loggerheads with federal regulators attempting to gauge the antitrust threat posed by rapidly developing technologies seeking to win markets that, in some cases, do not even exist.
Microsoft dispatched numerous lawyers to Washington over the past two years to argue that its market dominance was no threat to others and that it was due to technological prowess, marketing superiority, hard work and luck--not anti-competitive behavior.
Besides former Federal Trade Commissioner Patricia Baily, Microsoft has utilized attorneys from New York’s Sullivan & Cromwell as well as from Preston Thorgrimson Shidler Gates & Ellis, the Seattle-based law firm where Gate’s father is a partner, in its battle against the government.
But for all the legal maneuvering between high-powered Wall Street and government lawyers, the future of the information superhighway could hinge on the test of wills between Microsoft Chairman Bill Gates, the nation’s second-richest man, and the federal government’s chief antitrust cop--Anne K. Bingaman.
Before Clinton appointed her as assistant attorney general in charge of the antitrust division, Bingaman, 50, brought several high-profile consumer class-action lawsuits against big companies, leading some to fear she might be tough on big business.
As an antitrust regulator, Bingaman has withdrawn permissive guidelines on relations between manufacturers, wholesalers and retailers and has taken aim at foreign consortiums with business interests in the United States.
In recent months, however, a flurry of Justice Department settlements with MCI Communications Corp., AT&T; and other telecommunications giants suggested that Bingaman might not be as tough on the high-tech industry as with those other fields.
Indeed, the Justice Department settlement keeps Microsoft intact as a company and only alters software licensing arrangements in order to promote competition.
Still, Microsoft received more of a rebuke than many businesses did during 12 years of Republican administration antitrust enforcement that ended in 1992.
During the period, a wave of merger activity and industry consolidation erupted. The era was marked by a more than 60% decline in so-called private antitrust action as the Justice Department and the courts embraced a laissez-faire approach to antitrust regulation.
But although computer hardware makers such as Apple Computer Co. and IBM Corp. did not gain dominant shares of the field during the period, the computer operating software produced by Microsoft--Windows and MS-DOS--grew by leaps and bounds.
In 1992 alone, Microsoft sold more than 20 million copies of its MS-DOS software program for more than $750 million, according to Dataquest Inc. of San Jose. The software has now been installed in more than 75% of the world’s 150 million personal computers.
Despite the agreement, some experts believe Microsoft will continue to dominate the computer software field.
“Microsoft will use its clout to remain king of the hill for some time,” predicted Jim Warren, a Bay area computer writer for Microtimes and several other publications. “The Department of Justice is going to apparently permit them to continue to announce (new software) years in advance of actually delivering anything. These . . . fantasies freeze everybody else out of the market as people sit there and wait for Bill to deliver.”
