Now that the U.S. Department of Justice and a coalition of state attorneys general have filed broad new antitrust actions against Microsoft, keeping straight what the fight is (and isn't) about is going to get very difficult, very fast. Each side has an interest in pressing its arguments to extremes, even if that muddles the issues.
The first thing to keep in mind as you follow the coverage is that this is not a dispute over whether Microsoft is a monopoly. Everyone under the sun, except Microsoft itself, seems to accept that the company's 90 percent share of the market for personal computer operating systems makes it a de facto monopoly. But under the Sherman Act, the 1890 statute under which the complaints against Microsoft have been filed, monopolies in themselves aren't illegal. What's forbidden is for a company to use a monopoly in one area to try to secure a monopoly in a new and distinct market.
That's precisely what the government is now charging Microsoft with doing in its battle with Netscape to control the market for Web browsers. In quotation after quotation from internal memos cited in the Department of Justice filings, Microsoft officials declare that their best and possibly only hope of winning against Netscape was to "leverage" their control of the Windows operating system to favor their own browser product, Internet Explorer.
Pursuing such "leveraging," Microsoft decided to "integrate" Explorer into Windows itself -- a process barely begun in Windows 95 but fully under way in the forthcoming Windows 98. Microsoft argues that wrapping the browser into Windows is simply an "innovation" to benefit consumers and give them more choices. The government's suit paints the move as a pure business strategy to defeat Netscape: Most PC buyers have little choice but to purchase Windows, and if buying Windows means receiving Explorer as well, how can Netscape compete?
Bill Gates says, "Interfering with the freedom to innovate through lawsuits like these will limit -- not expand -- choice." Clearly, Gates and the government define "innovation" and "choice" in starkly different ways. Where do the interests of the public lie?
The typical computer consumer has not been injured in the browser wars. The intense competition between Netscape and Microsoft meant that each company furiously developed and (sometimes) improved its browser. Microsoft's strategy of giving Explorer away effectively prevented Netscape from charging, and we all wound up with free browsers. So far, so good. If this were only about browsers, no one would be getting terribly excited about these antitrust suits.
In fact, what's at stake is whether Microsoft retains the ability to use the power of its Windows monopoly to "leverage" itself into the many other Internet-related businesses that are due to boom over the next decade. Today, Microsoft is integrating the browser; tomorrow, will Microsoft "integrate" MSNBC, Carpoint, Expedia and Sidewalk? Windows 98 already includes a TV guide tied to Microsoft's WebTV product and a "channel bar" that points users to Web sites preselected by Microsoft. Sooner or later, all this "integration" stops being just about convenience and starts giving Microsoft prodigious power to shape the entire landscape of Net-based information and commerce.
People sympathetic to Microsoft often argue that the company's monopoly is a public good in itself -- that we need a single company to set an operating-system standard so that the rest of the software industry can be sure that its products will work together reliably. Microsoft does play that role today, and in the process it rakes in enormous profits, which it has used to expand into other markets. Nothing wrong with that, in itself. But if Microsoft uses its control of the desktop to push its media properties and service products as aggressively as it has pushed its browsers, its claim that it's offering consumers more "choice" will be exposed as a hypocritical deception.
In the browser arena, Microsoft can argue, not conclusively but at least reasonably, that it is simply expanding the capabilities of operating-system software, just as it previously did by incorporating disk-compression utilities and other tools. But by no stretch of the imagination are looking up news or buying a car mere functions of the operating system.
What Microsoft's opponents say they want is a level playing field -- one where Microsoft's operating-system monopoly does not give it an unfair advantage in other markets. But how would we get there? One problem with the government suit is that it's very difficult to devise what lawyers call an appropriate "remedy." The Department of Justice suit asks that Microsoft essentially split off Explorer from Windows -- and that when the company does distribute Explorer with Windows, it must also include Netscape's Navigator browser.
Microsoft was apparently so incensed at this particular point that it quit the 11th-hour negotiations over the weekend, at which lawyers from both sides had tried to compromise and avert the government's filing. Gates argued that the demand was "like requiring Coca-Cola to include three cans of Pepsi in every six-pack."
Well, not quite: When you add three Pepsis to a six-pack, you've got to subtract three Cokes. Software doesn't work that way; it's not a zero-sum game -- adding Netscape's browser to a computer doesn't knock Explorer off it (although thanks to the way Microsoft has coded Windows, the two programs can get into some thorny tussles over which is the "default" browser).
Microsoft seems to be putting a lot of its PR muscle behind this Coke analogy, but Gates hasn't got it quite right. In truth, as the owner of Windows, Microsoft isn't like the Cokes in a six-pack; it's like a chain-store operator who controls nearly every supermarket and corner store in the nation. Imagine that colas are a new craze sweeping the country; this distributor has just brought out its own new brand to compete with the market leader -- and decides not to stock the
competitor's drink. In this version of the analogy, the government is stepping in to require the store to give the other soda some shelf space.
It looks highly unlikely that Microsoft will be shipping copies of Windows bundled with Netscape Navigator any time soon. And given the supersonic pace of the technology industry, browsers will probably be a dead issue by the time this lawsuit is resolved. That doesn't mean the antitrust action is pointless, though. Armies of government lawyers watching a company's moves and poring over its memos and e-mail files can radically alter its behavior, forcing it to obey the letter of the law and giving its competitors a little more room to breathe.
At the very least, you can bet Microsoft officials will be more discreet about what they say. One of the mysteries of this story is why they weren't more careful in the first place in describing their plans to "cut off Netscape's air" and "leverage" Windows to crush the competition. It's not as if the company can't afford good legal advice. And back in 1995, when the browser wars started, Microsoft had just signed a consent decree to conclude a long battle with the Justice Department, so executives had to be familiar with the antitrust issues.
One guess is that the culture of arrogance and invincibility is so ingrained at Microsoft that nobody could restrain the bombast -- or thought to worry about future antitrust actions in which their words might sound incriminating. After all, when you control 90 percent of a multibillion-dollar market, what do you care about a few underpaid government lawyers? (They don't have stock options.)
That pugnacious attitude, at least, may fall victim to a prolonged antitrust fight. There's no telling how long these suits will drag on (when the Justice Department took on IBM in 1969, the battle lasted 13 years), how they will turn out or whether they will seriously affect Microsoft's market dominance. But even if they fail to reshape the software market and the computer desktop, the antitrust suits just might force the company to soften its take-no-prisoners culture -- and knock its ego down a few pegs.