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At first sight it seems strange to pounce on Microsoft after all this time. The software company has long enjoyed a near-monopoly of operating-system software for personal computers. A monopoly that has been fairly acquired is not necessarily illegal. And this one has brought consumers the benefit of a software standard, with lower costs and the guarantee of compatibility between programs and hardware. What is more, Microsoft has conveniently extended its monopoly by enlarging the operating system to include such tools as fax and data-compression software. All the while, computers have fallen in price, and their performance has improved. Innovation continues apace. Getting on for 200 new software companies were founded in America last year; twice as many as in 1990.
Many, among them most American consumers and until recently this newspaper, have concluded that this is reason enough to leave well alone. Yet Microsoft’s behaviour turns out not to have been so innocent (see article) . The Justice Department’s investigations have cast light on manipulation that ill befits a monopolist. And Microsoft’s attempt to extend its monopoly in operating systems to browsers, which enable users to roam the Internet, is not merely a question of incorporating a small utility program. If Microsoft has broken the law, it should be punished. If it now poses an unfair threat to new companies, then its power should be curbed.
Rules of engagement
Microsoft’s own memos reveal that some of its executives thought they could not rid themselves of Netscape’s Navigator browser purely by competing with it. The firm allegedly asked computer makers to install Microsoft’s own Explorer, not Navigator, threatening to withdraw their Windows licences if they refused. The Justice Department claims that Mr Gates also tried to persuade Netscape not to undermine Windows—though he calls this allegation an “outrageous lie”.
Browsers threaten Microsoft at the two points where it exercises control. The first is in the look of the computer screen, the most prominent arcade of shop windows in the wired world. It currently belongs to Microsoft: although users can adapt the screen, few do, so programs and websites owned by Microsoft and its allies are displayed to best advantage. Second, Navigator could one day combine with a computer language, called Java, to usurp Windows as the defining software for the desktop. Mr Gates’s nightmares are filled with programmers writing in Java, and users gazing at Navigator, while Windows is relegated to a commodity chugging away forgotten inside the computer.
Yet, however unpleasant Microsoft may have been to Netscape, it has a case to answer only if its actions have harmed consumers. In an industry where falling prices are the norm, the cost of a retail upgrade of Windows has more than doubled since 1990—though today’s package contains many new functions. And having established its Internet browser—and with its influence over users intact—Microsoft may be able to stifle services that would emerge with competition. That Microsoft felt it had to use its Windows monopoly to flatten Netscape only adds to the sense of unease.
Whatever the court rules, worries remain about the wisdom of tackling Microsoft. Some feel that in a rapidly changing industry, government intervention is doomed to fail. Beset by meddling, Microsoft may find it cannot innovate by adding new features to Windows. If that delays the evolution of computing—a big if—the cost to consumers would be high.
The preliminary injunction requested by the Justice Department neatly sidesteps these objections. It would like the court to make non-Microsoft browsers more available to consumers. It also wants computer makers to be able to determine the design of the first screen shown on a new computer, presumably in response to what customers say they want. Both measures would loosen Microsoft’s grip, while leaving it free to innovate. If the court sees fit, both rulings could be in force within weeks. Neither calls for intrusive regulation.
As the investigation proceeds, the Justice Department, egged on by Microsoft’s enemies, could seek harsher remedies, designating Windows an “essential facility” and obliging it to carry competitors’ products; controlling Windows’ pricing; or even breaking Microsoft into “Baby Bills”. On present evidence, that would be unwarranted: the law is designed to protect consumers, not Microsoft’s competitors. But monopolists have a responsibility to act with restraint. If Microsoft refuses to change its ways, the next antitrust action may need to contain something more drastic.
Cover credit: Bill Gates: EPA
