Article 5 of 54
The Kansas City Star, Mo., Jerry Heaster Column
KRTBN Knight-Ridder Tribune Business News: The Kansas City Star -
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
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
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.