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.