The Right Microsoft Rx
Testimony in U.S. vs. Microsoft, the most significant antitrust trial since a federal lawsuit broke up AT&T; in 1984, concluded Thursday. Next step: Both sides will present to Judge Thomas Penfield Jackson their arguments for whether the facts of the case show that Microsoft used monopoly power to undermine rivals. The two sides are worlds apart, but if they could agree on some of the basic facts it could lead to a voluntary settlement. That would be the best answer for both, and for consumers.
For Microsoft it would prevent Jackson from ruling that the software giant had behaved monopolistically, a court decision that surely would trigger a flood of lawsuits. Such a ruling would undercut Microsoft’s profits and bolster calls for splitting it up: the “remedy” that the company likes the least.
For the federal government, the right kind of settlement would get its job done--discouraging unfair business practices and encouraging competition and innovation--and avoid a big-government solution that could lead to a Wall Street bashing of Washington for hobbling one of the American economy’s growth engines.
The trial uncovered overwhelming evidence that Microsoft has behaved as the worst kind of bullying monopolist. An internal memo of the Compaq company listed 12 ways it could be sunk by Microsoft if Compaq decided to use software from a Microsoft competitor, while IBM executive Garry Norris displayed e-mail and notes illustrating how Microsoft insisted it would “work with” his company only if it promised not to put competitors’ software, from the World Book Encyclopedia to Lotus Notes, on IBM personal computers.
Rather than trying to raze this mountain of evidence, Microsoft argues that whatever it might have done in the past, it is no longer a monopolist now that America Online has bought Netscape for $10 billion. This defense is absurd because AOL/Netscape is in the Internet portal business and does not threaten the core of Microsoft’s monopoly in operating systems and applications software.
The extreme solutions that both sides want Jackson to support are antiquated, particularly for prosecutors and software executives purporting to be ahead of their time. A remedy suggested by federal prosecutors, splitting Microsoft into so-called Baby Bills, each with a narrow mission, is out of step with the trend toward “convergence” in which computer, telephone and TV functions are merging in a single super-appliance.
Microsoft’s favored remedy is essentially the status quo, in which only Microsoft software designers get to modify Windows software. It is utterly out of step with the “open source” movement embraced by today’s brightest computer programmers. They hold that innovation thrives only when the underlying instructions on which the software is based, the “source code,” is made visible and available to outside tinkering.
The key to a successful outcome, whether voluntary or imposed by Jackson, is to have Microsoft auction or license the code for Windows to at least several companies, each of which could develop and sell its version independently, thereby creating instant competition and innovation in the operating system business. No one, however, is suggesting that Microsoft give away the code.
Netscape does do that, publishing its source code on the Internet so independent programmers can customize versions to meet different needs. Apple has released some source code to encourage new software applications for Macintosh computers.
Having Microsoft license or auction its source code would not itself end any monopoly. But opening Windows to innovators outside Microsoft would allow improvement, competition and lower software prices. Not least, it would get rid of the clunkiness that consumers complain about in Windows. It would also help Microsoft avoid those lawsuits, including a big one alleging that it overcharged computer makers at least $10 billion for the Windows operating system from 1996 through 1998.
No one wants to see Microsoft ruined, least of all the government. But Microsoft has to see that its future is different from its control-at-all-costs past.
