Let's Get This Straight: First Microsoft, now Intel?

Similarities between the two antitrust battles are all on the surface.

Published June 9, 1998 7:00PM (EDT)

Last month the U.S. Department of Justice sued Microsoft for violating federal antitrust laws. Now the Federal Trade Commission has filed similar-sounding antitrust charges against Intel. Different companies, same story? Not quite.

The FTC charges that "Intel illegally used its market power when it denied three of its customers continuing access to technical information necessary to develop computer systems based on Intel microprocessors, and took other steps to punish them for refusing to license key patents on Intel's terms." According to the FTC, when these three companies -- Digital, Compaq and Intergraph -- resisted Intel's wish to license their patents, Intel fought back by denying them access to the technical information that would allow them to build systems around forthcoming Intel processors: "Intel sought to injure the customer until that customer surrendered the patent licenses Intel desired."

The FTC's lead investigator in the case, William J. Baer, explained: "If Intel can use its monopoly position in the market for microprocessors to prevent other firms from enforcing their own patents, other firms will have little incentive to invent new features to challenge Intel's dominance."

That Intel plays hardball with other companies comes as no surprise; its aggressive practices are outlined in detail in Tim Jackson's 1997 book, "Inside Intel." Whether the FTC can prove that Intel's tough tactics crossed the line into outright illegality remains to be seen. What's clear to anyone paying close attention to the technology headlines is that Intel is, at this moment in its history, hardly an unstoppable juggernaut like, well, Microsoft.

Intel's microprocessor chips and Microsoft's Windows operating system are so tightly associated in the public mind that the computer trade press regularly refers to the combo as "the Wintel monopoly" (or, more precisely, "duopoly"). But the two companies are in substantially different positions in mid-1998. Microsoft has achieved unparalleled dominance of the PC software industry, not only with Windows but with its Office application suite; with the vast profits from these monopolies, it's trying to extend its domination into the new Internet software market -- and it's beginning to play around in the media marketplace as well. Microsoft, in short, is more powerful today -- and less vulnerable -- than ever before.

Intel, on the other hand, has been having a rough time of late. Several high-profile computer manufacturers are now building systems around processors from longtime Intel competitors AMD and Cyrix (now owned by National Semiconductor); the competition specializes in chips for the low-end, sub-$1,000 market that Intel long ignored, preferring the higher profit margins of the high end. Trouble is, the low end is where the market has headed in the past year. Scrambling to keep up, Intel has now introduced a new line of cheap chips called the Celeron -- but it's gotten mediocre to poor reviews and seems unlikely to give Intel back full control of this market. Meanwhile, last week Intel announced that its next-generation Merced chip, originally slated for 1999 release, won't ship until 2000.

None of this means that Intel's power over the microprocessor market -- which it controls 80 percent of -- is likely to disappear anytime soon. But it does remind us that the cyclical microchip business is in constant turmoil, and that Intel's dominance is under constant, real assault. By comparison, Microsoft is sitting pretty: Intel's competitors have introduced low-cost knock-offs of its chips, but nobody is going to produce a knock-off of Windows. Producing chips requires investment in billion-dollar factories, or "fabs," that must be planned years in advance; producing software requires only man-hours. No one at Microsoft has to worry about "wafer yields" and the other arcane problems that dog the semiconductor manufacturing business.

For the consumer, the most important issue in the Microsoft suit is the government's declared -- and, in my view, appropriate -- effort to prevent Microsoft from using its Windows monopoly to create "choke-points" over the distribution of information and commerce on the Internet. If the Windows desktop becomes, thanks to Microsoft's own "innovations," the average user's gateway to the Net, it needs to be a neutral kind of portal to which many different companies have access -- not just a place for Microsoft to peddle its own media wares.

But Intel lacks Microsoft's media-industry ambitions; it's done nothing on the scale of MSNBC or Sidewalk. When Intel does put its name on media properties, like its Web site called Mediadome, it's usually to showcase advanced technologies that happen to work a lot better running on high-end Intel processors. Mostly, Intel's role in the media world is as a big-bucks advertiser -- and it has thrown its weight around in that role (last winter its program to make big advertising buys on the Web for sites that "optimized" their content for the Pentium II processor raised some hackles). But so far no one has reason to fear that Intel wants to be anything more than the world's leading chip manufacturer -- or wants to "leverage" its monopoly into other industries.

That's why there isn't more hoopla around the Intel suit -- and why there doesn't need to be. Microsoft's products are interfaces; that means, among other things, that they are literally in our faces every time we use a PC. Intel's products are buried deep in our systems' motherboards, and despite the company's fantastically successful "Intel Inside" campaign, most of us rarely think about the brand name on our CPUs. And while it's a cinch to peel that Intel sticker off your new computer, it's far from easy to escape Microsoft's Windows start-up screen.

Like the Microsoft suit, the FTC's Intel case will now wend its way through a process that could take anywhere from three months to a year before a final ruling from an administrative court -- which could in turn be appealed, first to the FTC commissioners and then to federal court. By that time, of course, the chip industry will have run another lap or two around the processor-speed racetrack, and the marketplace will probably look very different from where it is today.

Though I'm a little suspicious that the FTC's antitrust honchos are just jealous of their Justice Department colleagues' limelight, I'm glad they're on the case. But unless our legal and regulatory authorities figure out how to boost their own processor speeds, they're going to keep falling further behind the frenetic chaos of the technology industry.

By Scott Rosenberg

Salon co-founder Scott Rosenberg is director of MediaBugs.org. He is the author of "Say Everything" and Dreaming in Code and blogs at Wordyard.com.

MORE FROM Scott Rosenberg

Related Topics ------------------------------------------