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Creating a free and competitive market place for consumers

From Diana J. Choyce
May 08 - 21, 2000

The verdict is in by the US Department of Justice on its monopoly case against Microsoft. This past Friday the government agency filed a seventeen page proposal that includes breaking Microsoft into two separate companies.This, it is hoped, will keep Microsoft from its monopoly minded business practices and is the harshest antitrust penalty the DOJ has handed down in twenty years. "Under our proposal, neither ongoing government regulation nor the self-interest of an entrenched monopolist will decide what is best for consumers,'' said Joel Klein, the head of the Justice Department's antitrust division. "Instead, consumers will be able to choose for themselves the products they want in a free and competitive marketplace.'' What then is ahead for the company? Let's look at the reaction to the proposal, and the proposal itself.

The government would like the company to separate its operating system form its other applications. The application side would include MS Office, Internet Explorer Browser, and their online media ventures along with other various assets. The split would last for ten years. "This was not developed by anyone who knows anything about the software business,'' an angry-sounding Bill Gates, Microsoft's founder and chairman, told a telephone news conference. "These proposals would have a chilling effect on innovation in the high technology industry. Microsoft could never have developed Windows under these rules,'' Gates said in an earlier video taped statement. Gates vows to appeal all the way to the Supreme court if need be. And given that a new US President will be elected this year one would be hard pressed to guess the outcome of the appeals.

There has been much speculation about how this judgment will affect consumers. Microsoft has long contended that its efforts to standardize the way people interact with computers through Windows has benefited consumers. Jamie Love, director of the Washington, D.C.-based Consumer Project on Technology founded by activist Ralph Nader said the issue boiled down to whether consumers benefit most form a centralized or decentralized software development efforts. He also says that Microsoft has stifled competition by impeding efforts by independent companies to offer alternatives. "You can think of the Internet as the opposite of the centralized planning model of Microsoft where one company controls the standards to which everyone must develop,'' Love said. However, Jonathan Geurkink, an analyst with Seattle-based brokerage Ragen MacKenzie Inc., said the plan could cripple the high-volume, low-cost strategy that has allowed Microsoft bring computing to hundreds of millions of people around the globe. "If at the end of the day we're concerned about consumers and what they pay for computer software, I don't know that breaking up Microsoft will help that,'' Geurkink said. "By splitting the company in two, there's a lot of synergies lost between the application side and the operating system side. If you sever this, it creates more cost in terms of developing software,'' he said. N.Y. State Attorney General Eliot Spitzer, said he looked forward to "an explosion of innovation'' to results from the opening up of the markets for both computer operating systems and the applications that run on top of programs like Windows. Richard Smith, an independent Internet security consultant and frequent critic of software industry foibles, said the battle to reshape the software industry is part of a complex on-going drama which is difficult for consumers to grasp. "From the consumer standpoint maybe the impact is too abstract and will be of little interest to them,'' he said. Microsoft's "everything-but-the-kitchen-sink'' approach has undermined attempts to create innovative software outside the Windows world, Smith said. "The reason for having complexity is to basically keep competitors out,'' he argued.

Employees at Microsoft don't appear to be worried over the decision. "It won't really have any impact on my job, and I don't think they'll actually go through with it anyway,'' said a software testing engineer who would give his name only as Steve. Although employees are certainly aware of the court case, they said they feel there would be little or no impact on their lives. "I'm going to be doing the same job next week that I was doing this week,'' said an employee, who declined to be identified. There was a more nervous attitude in the small stores that surround the Microsoft facility. "Perhaps they (the employees) are indifferent now, but in a week it might be a different story,'' said John Seo, manager of a dry-cleaning store. Seo said he believed Microsoft would eventually be split up, but added, "Even split, the two (companies) will both be huge.'' Redmond Mayor Rosemarie Ives joked that reporters were going to have a difficult time finding panic in the community of about 44,000 residents in the eastern Seattle suburbs even if the government eventually won its case. "Change does bring opportunity,'' she said.