Article 5 of 54
The Kansas City Star, Mo., Jerry Heaster Column
Jerry Heaster
KRTBN Knight-Ridder Tribune Business News: The Kansas City Star - Missouri
Copyright (C) 2000 KRTBN Knight Ridder Tribune Business News; Source: World Reporter (TM)


MICROSOFT JUDGE SHOULD CONSIDER CONSUMERS' BEST INTERESTS: Regardless of how anyone feels about Microsoft, it's becoming increasingly difficult to see how the presiding judge's approach to restructuring the company will help consumers.

Such doubts raise a compelling question: If antitrust law's purpose is to protect consumers, why is Judge Thomas Penfield Jackson seeking a remedy that may harm rather than help consumer interests?

After Justice Department trustbusters recommended splitting Microsoft into two companies, the judge counterproposed a three-way split. Justice's lead attorney David Boies, however, responded that this would be time-consuming and have "disruptive effects," not only on Microsoft, but also on the entire software industry.

Even when Justice initially responded to Jackson's finding that Microsoft was guilty of monopolizing the operating-system market, its remedy of splitting the company in two was met with skepticism. Critics generally claimed a breakup wouldn't heighten competition in ways that could be expected to benefit consumers. Instead, the resulting competition between two or three separate companies probably would lead to higher prices by ending the cross-subsidies of some products Microsoft employs to sell other products.

For instance, says New York University economist Nicholas Economides , a separate browser company would have to charge for its product, which Microsoft currently doesn't do. This would make Internet access more expensive, he contended in a recent analysis in The Wall Street Journal.

In the operational context, Economides predicts a period of difficulty in the aftermath of any breakup. Each "Baby Bill," as the proposed new companies are characterized, would produce separate versions of Windows, which probably wouldn't be compatible. Information technology managers thus would be forced to go through a long period of adjusting and readjusting until one new operating system became dominant.

Another curious aspect of the Microsoft case is Jackson's apparent desire to get it over with as soon as possible. While nobody likes to see legal action drag on interminably, the target is one of the most important components of the economy. If mistakes are made in haste that have long-range debilitating results for this critical industry, it could be to the economic detriment of all Americans.

Moreover, it seems a reasonable expectation for the presiding judge to acknowledge his limitations in this matter. Jackson is far from being an expert in information technology matters, and may be relying on old-economy instincts ill-suited to dealing with new-economy problems.

Economides points out that some observers favor a Microsoft breakup based on the declining price of long-distance calls after AT&T's dismantling. It's not a good analogy, he says, because the various components of "the old Ma Bell empire" were separate entities with plenty of managers to oversee the restructuring. Microsoft, on the other hand, is an integrated company with fewer than a couple of dozen senior executives. So the talent pool wouldn't be sufficient to man the new companies.

As the NYU prof admonishes, it would be good for those involved in deciding Microsoft's fate to remember whose interests they're supposed to be serving.


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