Couldn't provide a link to this article as it came from a listserver.
Microsoft Breakup: Are 'Baby Bills' Any Better?
By WAYNE RASH
InternetWeek
You probably haven't seen this in your local
newspaper, and it certainly hasn't been on
television where you live (except maybe in
Seattle), but Microsoft's fate is already being
decided in the back rooms of a government
office in Washington. The assumption by the
Justice Department is that Microsoft is going to
lose its antitrust case. As a result, U.S.
government attorneys are meeting with
representatives of states attorneys general to
decide how Microsoft will be broken up, or
whether some other action should be taken.
Right now, the betting is that Microsoft will be
broken up, much as the old AT&T was into a
long distance service and a bunch of regional
phone companies. The question many are
asking is what the new Microsoft companies
will look like. On the other hand, others are
asking why this is necessary and how it could
have happened.
The answer to how it could have happened is
relatively easy. In a word, the answer is
arrogance. Microsoft's videotaped
demonstrations in hearings this month are a
classic example of this. Apparently the
company was so sure of itself that no effort was
made to perform tests that were comparable or
fair, or to accurately show the software at
which the testimony was aimed. The result was
a series of embarrassing questions by
government attorneys that eventually led to
admissions by Microsoft executives that the
company's tapes did not accurately reflect the
truth. In other words, the government caught
Microsoft in a series of intentional lies and then
made Microsoft admit to it.
The more important question is whether the
actions the government is contemplating are
really necessary. After all, being arrogant may
be obnoxious, but it's not a federal crime.
On the other hand, Microsoft has clearly skirted
the truth in its testimony, so it's fair to ask
whether its promises to change can be
believed. Will Microsoft actually change its way
of doing business even if it promises to?
The answers to the next questions are mostly
speculative, but they're still important. What will
a future, cut-up Microsoft look like, assuming
the government wins and the government and
states agree that it's the right approach?
Likewise, what effect will it have on the new,
independent parts of Microsoft?
Guesses by observers are all over the map. My
belief is that the government will try to find a
way to create four roughly equal-sized
companies organized along functional lines.
This means you might see a company that had
Microsoft's consumer products, such as
Windows 98, as well as home products such as
Flight Simulator, in one company. Another
company could contain operating systems,
such as Windows NT (or Windows 2000 or
whatever), and the various related products
such as SMS. Yet another company might have
the Internet products, such as Internet Explorer
and IIS. The last might contain services such
as the company's consulting arm, publishing
and entertainment.
Am I right? Who knows? There are certainly
plenty of ways this could play out, and this is
only one way. Another might be to lump
Windows 98 into the networking business with
NT, since they're allegedly going to be one
product some day.
Adding to the confusion is the question of who
would own all of this. Would Bill Gates keep his
huge share of Microsoft, simply divided into
four companies? If so, would that solve the
government's problems or perceived problems?
If not, would Gates be forced to relinquish his
interest in portions of these companies? What
would that do to his property rights?
Finally, there's the question of how the new
companies that were once Microsoft would
compete in the marketplace. When AT&T was
forcibly torn asunder, many predicted the Baby
Bells would simply be mirrors of their parent.
Instead, the new regional phone companies
became more innovative and aggressive than
Ma Bell ever was. Their smaller size appeared
to free the Baby Bells from their constraints. As
a result, the communications landscape
changed far beyond what anyone imagined.
The same thing is likely to happen if the
government succeeds at breaking up Microsoft.
In short, Bill Gates will have a handful of
(maybe four) newly competitive, highly
innovative smaller companies instead of one
large one. I think that history demonstrates that
they will change the landscape of computing
much more than Microsoft would in the future if
it remains intact. In short, the Baby Bills will
grow faster and be much more aggressive than
the parent would be. I wonder if this possibility
has occurred to the government attorneys in
the Justice Department? If it did, I wonder if
they'd still think a breakup of Microsoft was a
good idea.
Looks like in a couple of years we'll see one of the Baby Bills writing software for Linux. |
