Economist Says That Microsoft Sanctions Should Look Ahead
By REUTERS
Filed at 7:53 p.m. ET
WASHINGTON (Reuters) - An economist testifying for nine states seeking tough antitrust sanctions
against Microsoft Corp. balked on Thursday at supporting the states' key demand for a stripped-down
version of the Windows operating system.
Carl Shapiro, a former U.S. Justice Department official, backed tough measures to protect competition in
technologies that have emerged since the trial began, but declined to endorse parts of the states' proposal.
Remedies should restore competition by preventing Microsoft from dominating new technologies that
threaten the Windows monopoly it was found to have illegally protected, said Shapiro.
``Under these circumstances, an effective remedy must be forward-looking and not merely focus on the
particular products or technologies that posed a threat (to Windows) five years ago,'' Shapiro told U.S.
District Judge Colleen Kollar-Kotelly.
He was the 15th witness called by the states opposed to Microsoft's proposed settlement of the case with
the U.S. Justice Department which the judge is still considering.
Microsoft attorney Michael Lacovara highlighted Shapiro's failure to address the ``modular'' Windows
proposal and cited his previous support for hiding consumer access to some Windows features -- an
option being offered by the company to help settle the landmark antitrust case.
Lacovara also got Shapiro to concede that Microsoft might be right to criticize a proposal forcing it offer
a discount when computer makers remove Internet Explorer from Windows.
THORNY AREA
Two years ago, Shapiro told the original trial court that removing end-user access struck an ``excellent
balance'' between Microsoft's need to integrate its software and the wider need to preserve competition.
Shapiro told Kollar-Kotelly he could not testify about a bare-bones version of Windows because he
lacked the computer expertise. ``I did not feel I could offer a clear view that could help the court on that
provision,'' Shapiro he said. ``I think it's a very thorny area.''
Later, Shapiro conceded he could not vouch for another element of the states' plan that would force
Microsoft to divulge technical data to ensure software applications like its Office business suite work
well with other operating systems.
``I am not endorsing that,'' Shapiro said. ``It is outside the principle I have endorsed.''
The nine states that rejected the settlement want Microsoft to offer a stripped-down version of Windows
to level the field for rival ``middleware'' such as Web browsers and media players.
Microsoft contends those Windows changes are technically impossible, although Princeton University
computer scientist Andrew Appel disagreed in testimony earlier this week.
In addition to discounts for removing the browser from Windows, the states' proposal requires Microsoft
to give away the rights to Internet Explorer.
Lacovara said computer makers could strip out the browser, collect their discount and then replace it with
a free, cloned version, leaving Microsoft with no incentive to spend money improving Internet Explorer.
``You may very well have a valid point about the peculiar treatment of IE,'' Shapiro said.
NEW TECHNOLOGIES
The states are also seeking sanctions they say would restrain Microsoft from dominating technologies that
have emerged since the antitrust case was filed four years ago.
Microsoft argues remedies cannot go beyond specific wrongdoing upheld by a federal appeals court last
year, mainly that Microsoft tried to crush Netscape's Internet browser in an effort to preserve the
Windows monopoly.
Shapiro, a professor at the University of California at Berkeley, served during 1995 and 1996 as Deputy
Assistant Attorney General for Economics in the Clinton administration that brought the case against the
software giant.
Microsoft had killed off a ``rare and serious threat'' to Windows by crushing Netscape's Navigator
browser and hobbling Sun Microsystems Inc.'s Java programming language, Shapiro said.
``The clear implication: A broader remedy is required to truly restore competition,'' he said.
Shapiro singled out Web-based services as the most serious threat to the Windows monopoly since 1998,
when a federal judge first ruled that Microsoft violated antitrust laws.
Microsoft is developing its .NET services that reside on an Internet server rather than in software on the
user's computer. Company officials have said .NET is key to Microsoft's future.
``The clear implication of these trends is that the remedy should place great emphasis on making sure that
Microsoft cannot use its Windows monopoly to impede the ability of non-Microsoft servers to compete
effectively and to serve up applications to desktops,'' Shapiro told Kollar-Kotelly.
It remained unclear who Microsoft would call for its first witness next week as the hearings enter their
fifth week. Microsoft Chairman Bill Gates and Chief Executive Steve Ballmer have been listed among 13
employees that might testify.
The remedy hearings are expected to run at least through May at their current pace.
The nine states still pursuing the case are California, Connecticut, Florida, Iowa, Kansas, Massachusetts,
Minnesota, Utah, West Virginia, plus the District of Columbia.
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