Published Sunday, April 23, 2000, in the San Jose
Mercury News
TECHNOLOGY/DAN GILLMOR
What government lawyers
should request this week:
Break up Microsoft
BY DAN GILLMOR
Mercury News Technology Columnist
BREAK it up.
That's what the federal courts should do with Microsoft Corp., the
most powerful and unrepentant monopolist to have emerged since the
heyday of Standard Oil. And it's what the U.S. Justice Department,
19 state governments and the District of Columbia should request this
week when they file their proposed sanctions with U.S. District Judge
Thomas Penfield Jackson.
I wish a less drastic solution could work. And I fear the government
lawyers, who overwhelmingly proved their case in a pathbreaking
antitrust trial, will talk themselves into milder -- and ultimately useless
-- remedies.
But the record is all too clear. Microsoft's leaders plainly do not
believe the antitrust laws apply to what they do. They are smart and
tenacious and will thwart any sanctions that fall short of fundamentally
altering the company's structure.
They've done it before. In 1994, they staved off a court battle by
agreeing to an antitrust consent decree. Microsoft boss Bill Gates
immediately sneered that the decree would have zero impact.
Even that relatively toothless document, which allowed Microsoft to
retain an unfairly won monopoly and did little to prevent its abuse,
was too much for Microsoft to bear. It violated the terms of the deal
anyway, provoking a 1997 Justice Department response that
morphed into the current case in Jackson's Washington courtroom.
Normally, a defendant who's lost at trial and is about to be sentenced
shows some contrition. But this is no normal defendant.
Last week, in the wake of Jackson's verdict -- and just days,
remember, before the government was scheduled to recommend
remedies -- Microsoft chief executive Steve Ballmer remained defiant.
He told the Washington Post that Microsoft has ``behaved in every
instance with super integrity' and that there was no need to alter basic
business practices.
Give Microsoft credit for consistency -- and chutzpah.
Ideally, the company should be split into at least five new enterprises
-- two that own all rights to the various flavors of the Windows
operating systems; two with rights to the Office suite and other major
desktop applications; and the other to take what's left.
If the operating system companies want to give away an office suite or
Internet browser, fine. But the one that didn't would, in theory, enjoy
a cost advantage over the other, not to mention the ability to offer
manufacturers and consumers more choices via deals with third
parties.
Separate operating system companies might also lead to fewer bugs
and more true innovation -- Microsoft's primary mission in life,
according to the syrupy commercials the company is currently running
on TV.
Microsoft's anguished protests at the very idea of a breakup strike me
as Brer Rabbit-ish -- a clever plan to be thrown into the briar patch. I
can well imagine the company opting to split into cleaner divisions --
say, one company owning the operating system and another with the
applications and so on. This would simply create new monopolies, at
least for the companies that owned the Windows and Office
franchises.
Other options unpalatable
Assuming a breakup isn't going to happen, are there conduct
remedies that would have teeth? Possibly, though we'd risk creating
something we should avoid at almost all costs: a federal Software
Design Administration. Ugh.
One useful idea is to prevent Microsoft from giving preferential
treatment to its own applications software units over third-party
software developers. Requiring consistent and openly published
pricing of Windows itself -- loosening the company's choke-hold over
PC makers -- would also help.
Forcing Microsoft to create a Linux version of Office, as some have
suggested, is absurd. You can't force people to be creative. Another
nutty proposal would require Microsoft to sell off the browser
software.
Look to the future
No one familiar with Microsoft's tactics believes it wouldn't work
endlessly to evade any conduct restrictions. And given the company's
huge cash hoard and moves to extend its tentacles into other
businesses, even solving some past problems wouldn't deal with the
future.
So the judge would be forced to impose an administrative nightmare
-- grossly intrusive oversight that in the end would be
counterproductive to the goal everyone should want: ensuring more
competition and innovation.
That's why it's time to break up Microsoft now. Milder sanctions will
not work. They'll simply postpone another day of reckoning, adding
to already irreparable damage to competition and innovation.
A clean break might not be good for Microsoft shareholders, who
have been enriched by a company that has broken laws, though
history suggests that stockholders come out ahead after corporate
dismemberments.
Some of the shareholders in this case are Microsoft's talented, smart
employees, who would be great competitors even in a fair fight. Even
if they took an early hit, they'd recover nicely.
Fair fights aren't part of Microsoft's management playbook, though.
The company boasts that it'll win the case on appeal, but it's also
pouring vast sums of money into public-relations campaigns, political
races and lobbyists' wallets. Could it be trying to overturn in other
arenas what it may well lose in the courts?
Microsoft, still the most powerful company on Earth, sees this as a
battle for survival -- for its right to seek control over the chokepoints
of tomorrow's commerce and communications. It is behaving
accordingly.
The government lawyers may not fully grasp this. But they should give
it some thought this week as they ponder what to submit to Judge
Jackson.
And then they should tell the judge to break Microsoft up. |
