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CONNECTED: Microsoft avoids one court battle, but the war is still to
be won Bill Gates gave the US Justice Department what it wanted last
week, but he still faces a larger anti-trust suit, says Wendy
The Daily Telegraph London
(1998 (c) The Telegraph plc, London)
So who won? Last week, Judge Thomas Penfield Jackson, who had
certainly the world's richest and maybe the world's most powerful
man under his thumb, delivered his ruling. Or rather he didn't.
For despite all its gesturing, all its grandstanding, and all its
petulant behaviour, Microsoft buckled and gave the US Department of
Justice under Attorney General Janet Reno, pretty much what it
wanted without the judge having to say very much.
Microsoft agreed to offer the most recent version of Windows 95
without requiring computer manufacturers to install the icon for
Microsoft's Web browser, Internet Explorer, on the desktop.
This agreement ends arguments over Judge Jackson's ruling on
December 11, directing Microsoft not to tie Internet Explorer to
computer manufacturers' licences to install Windows 95.
Washington's argument was that Microsoft had violated the terms
of a 1995 agreement that prohibited it from tying sales of one
product to the licensing conditions for another. Microsoft's
defence was that the browser is no longer a separate product but an
integrated part of the operating system, and anyway governments
should not meddle in software design.
The company's appeal against the December 11 ruling is due to be
heard on April 21; judgment day on the DoJ's original case is not
expected until May, when court-appointed "special master" Larry
Lessig, a Harvard law professor, is expected to report his legal
and technical findings.
Meanwhile, the European Union, Japan, and seven American states
are all considering anti-trust action against the company.
But this is not the end, nor even the begining of the end.
Unfortunately it is not even the end of the beginning. It is just
another spat on a long and seemingly endless road, one spat in a
larger anti-trust action which began in October, when the DoJ
hauled the software superpower into court demanding a fine of $1
million a day. The court agreement was cautiously welcomed by
Microsoft critics such as James Love, director of the
Washington-based Consumer Project on Technology.
"The current dispute in the US is important but extremely narrow,
as were the recent two settlements in the EU," he said.
"What the EU and the US - and possibly Japan - need to do is
bring a far broader suit against Microsoft and seek much broader
remedies. The model we have been most interested in is the conduct
rules imposed on IBM to open up the interoperability of its
In this 1984 EU ruling, IBM agreed to share information and
provide assistance to competitors marketing interoperable hardware
Something similar could be done with Microsoft now, forcing the
company to disclose details of file formats and other information
that would make it easier to write interoperable programs, and
requiring the company to support open protocols and standards.
But where does this leave Microsoft? "There are two general types
of anti-trust case," says Nicholas Economides , a professor of
economics at New York University's Stern School of Business,
"horizontal cases, in which a company is accused of monopolising an
industry or having a very large percentage of market share, and
vertical cases, in which the problem is that the company that
controls a big percentage of market A also controls or tries to
control a significant percentage of market B, where the
output of market A is required for market B."
The latter example might apply to, say, a dominant car
manufacturer who started buying up tyre or steel manufacturers -
or, possibly, a company that dominated the operating systems market
and competed in applications.
One solution is to break up the company - but this is extremely
radical, and, Economides thinks, a long way off, if it ever
happens. "I think it's extremely unlikely," he says.
"I think the DoJ is going to stick to the stuff they're doing
right now - trying to find various ways that the dominance of
Windows 95 and NT does not create or minimises disadvantages for
However, he says, it is "the fault of the DoJ that they didn't go
after Microsoft five years ago".
Nearly two years ago, when Connected last looked at Microsoft and
its chances for world domination, the company was six months into
its Internet era. At the time, Internet Explorer was in an early
release and Netscape had some 80 per cent of the browser market. It
is now 57 per cent and falling.
Then, one of the key developments on the horizon seemed to be the
Network Computer, a stripped-down machine promoted by Oracle and
Sun which, coupled with Java, would by-pass the need for Windows
entirely. Microsoft's answer was the Simply Interactive PC, which
was to boot up instantly and provide standardised connections to
common household appliances and computer peripherals.
"Visionware" at the time, the Simply Interactive PC has largely
faded from public view, although Windows 98 product manager David
Weeks says we can expect to see products emerging toward the end of
The most telling indicators of what Bill Gates is planning come
in what he spends his prodigious wealth on (over Christmas, the
Net's Bill Gates Personal Wealth Clock ticked past $38.6778
billion). The past year and a half, however, have seen Microsoft
invest widely while consolidating its position in the traditional
It has 86 per cent of the desktop operating system market; 87 per
cent of office suites (Lotus is second at 6 per cent, and Corel,
which just announced a quarterly loss, has only 4.7 per cent); 39.8
per cent of network operating systems shipped in 1996, slightly
ahead of Novell and Unix.
Perhaps the only source of comfort from those who fear
Microsoft's ever growing power is its seeming inability to crack
content. Its Web-based literary magazine Slate has been well
received, but plans to charge for it have been repeatedly put back.
Its local listings service, Sidewalk, once seen as a major threat
to local newspapers, is being scaled back, and despite pouring
money into its online service, Microsoft Network, it is at best
lacklustre. The same is true of its high-profile cable TV station,
Gates has things to worry about besides anti-trust actions: he is
losing the PR battle. This is despite his efforts to reinvent
himself as a media star (after his book's publication, for example,
he turned up on David Letterman's late-night talk-and-comedy show
in the US).
It probably didn't help to know that university students in
California are protesting against plans for Microsoft to take over
the supplying of the University of California's network.
Microsoft turned on a dime once before, in mid-1995, when it
realised how grossly it had underestimated the importance and
appeal of the Internet. Will it do so again in response to public