Microsoft's New Suit

They finally did it. On May 18, the US Department of Justice (DOJ) and 20 states sued Microsoft for monopolistic practices. Is the lawsuit fair? Is it overdue?

American antitrust litigation must address the question: Is the public better served when one company has a monopoly or near-monopoly in a market? That's not a frivolous question. Some monopolies make sense. If everyone wants Windows NT to develop at the fastest rate possible, if Microsoft's market position is in the public's best interest, and if Microsoft employs the most competent people in the industry, then a Microsoft monopoly might be good for the general public. If you think a Microsoft monopoly is bad, consider a market in which a federal standards committee controlled NT development: You might wait decades for a 64-bit enterprise version of NT.

At the moment, the antitrust case doesn't focus on NT; it focuses on Windows. Back in the Windows 3.0 days, Microsoft had competition in the desktop operating system (OS) environment: Novell's DR DOS and IBM's OS/2. To determine whether Microsoft's recent monopoly has affected the company's behavior, let's compare Microsoft's rate of innovation from mid-1992 to mid-1995 with its rate of innovation from mid-1995 to mid-1998.

In the first period, OS/2 worried Microsoft. During those 3 years, Microsoft released Windows 3.1 (April 1992), Windows for Workgroups 3.11 (November 1992, if I remember correctly), and Windows 95 (August 1995). All three products showed significant innovation, and all three were reasonably priced. During the second period, a time of desktop hegemony for Microsoft, the only Windows product the company produced was Win98, which Microsoft could fairly have called Windows 4.1 or Win95 OSR3. Win98 isn't a worthless product, but I don't see any features that are worth waiting 3 years for. Perhaps Microsoft bore so much less Windows fruit during the second period than during the first period because Windows is a dead end and the company doesn't have anywhere else to go. Or, maybe the lack of innovation is a result of the lack of competition.

The government agencies that filed the lawsuit complain that Microsoft does a lot of advertising in Windows, and they're right. From the time you run the setup program and sit through 45 minutes of marketing messages as files copy, to the items you see on the desktop when you start Win98, to your automatic arrival at Microsoft's Web site the first time you open Win98's Internet Explorer (IE), to the irritating Channel Bar, the Win98 experience is not about new technology; it's about marketing.

I think Win98's marketing scares people because it's different from familiar forms of marketing. I want to know how much CNN and Warner Brothers pay for space on the Win98 desktop. Where is the Win98 advertising rate card? I called Microsoft to find out how much my firm, Minasi Research & Development, would need to pay to be on the Channel Bar of the next version of Windows. No one could answer me. Does Microsoft use criteria other than money to decide which companies buy advertising in Windows? Are those criteria legal?

Oddly, I don't think Microsoft acts the way it does with the intention of ruling the world, but rather out of paranoia. Microsoft is constantly looking over its shoulder to see who might be catching up. The paranoia doesn't serve Microsoft well.

Bill Gates said that the government's suggestion that Microsoft include the Netscape browser in Windows is like requiring Coke to include two cans of Pepsi in every case of Coke, a sadly limping analogy. Microsoft doesn't make just Web browsers; it makes entire software universes. Telling Microsoft to ship Netscape with Windows is more like telling Wal-Mart that it must carry Sears Craftsman tools. Sears and Wal-Mart stores compete, but the success of Craftsman tools hardly spells Wal-Mart's downfall. Does anyone outside of Redmond seriously believe that Netscape can knock off Microsoft?

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