Microsoft trial has shaped entire industry

The Microsoft antitrust trial may have already left an indelible mark on the Information Age - even though its final resolution is months, perhaps years, away.

The US government's challenge of Microsoft's business actions has caused the software giant to back off some of its most aggressive practices, say some market analysts. That, in turn, has emboldened computer firms to do things they might have shrunk from in the past - such as ship units pre-loaded with competitors' software.

If nothing else, top officials of America's largest and most powerful knowledgeware firm have been distracted by legal matters at the very moment when the Internet has washed over their industry like a tsunami.

"In several respects, this lawsuit has already generated its own remedy," says William Kovacic, a George Washington University law professor and leading antitrust expert.

The titanic US vs. Microsoft battle reached a climactic moment Friday when Judge Thomas Penfield Jackson ruled that the Redmond, Wash., software maker has a monopoly over personal computer operating systems.

It's not illegal to be a monopoly, under US law. But it is illegal to use that monopoly as a weapon to try and bully competitors and win market share in other products. That's exactly what Judge Jackson concluded Microsoft has done, as it tried to leverage its leading Windows operating system into a similar advantage in Internet browsers.

Microsoft's actions have successfully deterred investment in technologies and companies which might threaten its success, Jackson ruled. "The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self interest," he said.

In some respects the ruling was not a surprise. Many trial observers had expected this initial step in the case to go the government's way. But the harshness of the language, and the degree to which the judge agreed with the government's assertions, indicated that Microsoft faces a difficult legal road ahead.

That road will be a long one. Jackson is expected to issue his remedies - the actions Microsoft must take to make up for its past transgressions - sometime in the spring. Appeals would take at least two years.

A settlement is always possible. Yet the degree to which the ruling favors the government may force Microsoft to play tough and hope it wins on appeal, while the Justice Department may now want to go for total victory.

"For there to be a settlement there has to be a reason for both sides to back off their most heroic expectations," says Mr. Kovacic.

Whatever happens next on the legal front, on the business front Microsoft has already been irretrievably altered by the US government's most important antitrust case in a generation, say many analysts.

The rest of America's exploding Information Age sector long has had a love/hate relationship with Microsoft. Respected, even admired for its products and success, the firm is also known as "The Beast From Redmond" for its bare-knuckled competitiveness.

That beast-like image may have now been shattered as the firm's competitors and even partners look to Uncle Sam to stay Microsoft's fiercest competitive practices.

"The case has made Microsoft appear vulnerable," says Rob Enderle, an industry analyst with the Giga Information Group in Cambridge, Mass. "The terror of Redmond has abated. Firms are feeling more free to do what they want to do."

Consider PC producer Dell Computer Corp., a longtime Microsoft ally. It is now offering pre-installed Linux operating systems on some of its computers, a break from its previous practice of shipping only Windows-equipped machines.

PC firm Gateway Inc. has even accepted $800 million from one of Microsoft's determined foes, America Online, to help produce cheap systems for Web browsing that will not need Windows software to operate.

Furthermore, the government's assault has already caused Microsoft to tone down some of its more aggressive actions. Last year the company dropped provisions from its contracts with Internet access providers that blocked them from promoting non-Microsoft browsers. In general, the firm now eschews exclusivity clauses when entering into new partnerships, say industry analysts.

All this is happening at the very time when the information business is in tremendous flux, with the Internet perhaps now supporting the long-predicted move of computing power away from the desktop and into the network ether.

In that sense, the Microsoft case may be analogous to the government's long-running antitrust effort against IBM, which occupied the energies of top officials just when the personal computer was coming of age. "If they hadn't been so distracted they might have been faster off the mark," says Peter Huber, a Washington lawyer and commentator on antitrust topics.

It is this aspect of the information industry - one revolution in technology following another - that lies at the heart of Microsoft's defense. In essence, the firm's defense has been that it is impossible to be a monopoly in a knowledge-based business where a firm with two employees and a garage may have a product that can explode in a year.

The antitrust case represents government market interference of the worst kind, say Microsoft defenders. There are no competitors to Windows because operating systems are a dead business, some analysts say. All the money and interest are flowing into non-Windows-based Web software and hardware.

"By the time there is any resolution in this case put in place things will have changed so enormously that the resolution will have no impact at all, other than diverting attention of the best and most creative minds in this business from creating new products," says Robert Levy, an antitrust expert.

(c) Copyright 1999. The Christian Science Publishing Society