Competition the big winner
Microsoft case gave the Internet time to grow
By Rex Nutting, CBS MarketWatch
Last Update: 3:49 PM ET Apr 3, 2000
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WASHINGTON (CBS.MW) -- The antitrust cops are celebrating a big victory Monday: A federal judge has ruled that Microsoft has violated antitrust laws with its cut-throat tactics and abusive conduct against friend and foe alike. See related story.
Ultimately, the Supreme Court might overturn the big victory for the Justice Department and the state attorneys general. Or the remedy (whatever that might be) that will be imposed by U.S. District Judge Thomas Penfield Jackson could be watered down or thrown out.
It won't matter. The case has already accomplished its main goal: Competition has been restored to high-tech markets.
While Microsoft (MSFT: news, msgs) was pulled over by the side of the road by Joel Klein and the state troopers, the whole world sped past. It was just what the industry needed to ensure that innovation wouldn't be stymied by a monopolist's market power.
Some will argue that Microsoft remains just as dangerous a competitor as it was before the case was filed nearly two years ago: It's won the browser war, its operating systems are still No. 1, its stock price has soared, and its profits and revenues are up. And don't forget that any final resolution of the case could take two more years.
All true. Even if Microsoft is broken up by the court system into several "Baby Bills" that would each inherit a copy of Windows, the company will remain a very powerful company no matter which way the technology evolves.
Microsoft still dominates the browser market and still writes much of the software that Americans use most on their personal computers at work and at home.
But look at what's happened in the two years since the suit was filed. The Internet has gone from a toy of the rich and idle to become an essential part of the national and global economy. Commerce over the Internet has exploded, especially in the lucrative business-to-business market.
Microsoft hasn't stood still during all this change. In the past two years, the company has invested billions of dollars and signed dozens of strategic partnerships with the companies that will be among the leaders in the new economy: AT&T, Apple, Nextel, Asia Global Crossing, Ericsson, Gilat, Qwest, Qualcomm, Roadrunner, CMGI, Vertical Net, Winstar Communications and USWeb/MD. The list goes on and on.
Some people see Microsoft's tentacles reaching into everything and worry that Bill Gates will control every aspect of their lives. But these deals, for the most part, show Microsoft's weakness, not its strength.
Microsoft has more cash than the Bureau of Engraving, but it has chosen for the most part to use that cash to buy just a share of a market rather than trying to replicate its monopoly in new areas.
Nobody knew it two years ago, but winning the Internet wasn't just a matter of controlling which browser people used. And it's turned out to be more difficult to monopolize the content or commerce of the Net than anyone realized. It seems almost quaint now that Microsoft tried to become the gatekeeper to the Internet by giving us a limited number of "channels" on our computer desktops.
Even in relatively fossilized world of personal computing, Microsoft's monopoly now faces at least a theoretical threat from the Linux operating system. Before the suit was filed, Microsoft would have killed off Linux's chances by bribing or leaning on the computer makers.
Microsoft's hardball tactics with the original equipment manufacturers were always the strongest part of the government's case. When even IBM is afraid to sell its own operating system on its own computers, you're looking at some awesome market power.
Changing Microsoft's behavior with the OEMs could be the easiest remedy for the government to police. Transparent pricing and freedom to customize computers for consumers' needs rather than Microsoft's would do wonders for competition.
As for the Internet, it looks like the Web is now too big and too diverse for anyone to control. Maybe the Microsoft threat to the Net was always overstated, but the lawsuit has given hundreds of other companies the time and opportunity to make their case in the marketplace without fearing the 600 pound gorilla from Redmond.
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