Lately the news has been full of talk about the impending breakup of Microsoft. Newspaper articles, TV ads featuring Bill Gates’ pasty face, letters to the editor, folks calling in to radio talk shows–everyone wants to know the answer to a host of questions. Will it help or hurt competition? Will it be a boon or a burden for computer users? Will shareholders get burned? What about my stock options? What will it mean for the Puget Sound economy? Will it kill the stock market? Etc., etc. ad nauseam.
Anyone who’s been following the case knows that the only real question is: will it ever happen?
The answer: probably not.
Sure, Judge Thomas Penfield Jackson has ruled that Microsoft is in violation of anti-trust laws and is a functional monopoly. The case is currently in the penalty phase, and Justice Department prosecutors are asking for the company to be cut in two, with one company responsible for Operating Systems (i.e., Windows 2000, NT, and CE) and the other company in control of all the applications software (Word, Excel, Powerpoint, Internet Explorer, etc.). This is exactly what I predicted a year and a half ago when the first arguments were being heard in the case.
This so-called “remedy” is no different from the agreement Microsoft signed with the Justice Department to head off an anti-trust investigation over a decade ago. In that agreement, Microsoft was supposed to keep a wall between its operating systems software unit and its applications software unit. Never happened. The company never undertook any separation of its software development units. It has proven impossible for the government to enforce the agreement, just as it will ultimately prove nearly impossible for the government to pursue a breakup. Here’s why.
Even as you read this, Microsoft’s lawyers are aggressively pursuing an appeals process that has every chance of overturning Judge Jackson’s ruling. The appeals court has already shown that it clearly favors Microsoft and is willing to reverse Jackson’s ruling.
The company is in for the long haul. Microsoft is not only appealing the ruling, it wants to subpoena all the documents Jackson used to make his decision. Then Microsoft lawyers want to cross-examine all of the expert witnesses. Then they want to appeal the penalty. This will take months, if not years. It’s already been nearly seven years since the Justice Department began its investigation of Microsoft; it could be another two or three or four years before the appeals process is finished.
Or it could end sooner, if George Bush, Jr. gets elected in November. Shrub has been heavily lobbied by Microsoft, he has a Microsoft lobbyist on his campaign staff, he’s taken Microsoft campaign contributions, and he’s condemned the anti-trust case. Gore, too, could alter the landscape at the DOJ; he’s also been the beneficiary of Microsoft largesse. A new administration in the White House may spell the end of the anti-trust case against Microsoft.
But let’s give the alarmists a little credence. What would happen if, against all odds, Jackson’s ruling stands and Microsoft is broken into two separate companies that can’t merge together for at least ten years?
Well, not much. The main goal of breaking up a monopoly is to create space for smaller–or at least different–companies to compete in the marketplace. This proposed split of Microsoft into two gargantuan companies will create–yes, you guessed it–two monopolies. So what if they can’t merge for ten years? They won’t be competing against each other; they’ll be cooperating–just biding their time, collecting market share, waiting for favorable conditions for a merger. In the meantime, there’s plenty of small fish out there for each of the them to swallow. The Microsoft applications software unit has always played second fiddle to the operating systems unit, because Bill Gates has always assumed that control of the operating systems market would lead to total dominance of the software industry. Once free of Windows, a new applications software company would be free to gobble up Oracle, Corel, Ariba, or even Commerce One. There’s nothing in the Justice Department’s “remedy” that would prevent this from happening.
Likewise, the split would have little or no impact on computer users. The software will still be expensive and full of bugs, just as it is today. Most programmers will still write their applications software to run on Windows, the dominant operating system. Hopefully, Linux would gain a few more fans. But could it ever overtake the Windows behemoth? It’s not likely.
Finally, for those business people who complain that the DOJ case against Microsoft is hurting the stock markets–don’t believe them. It’s the stupidity of short-term investors (which make up the bulk of investors today) that has driven the stratospheric rise and recent catastrophic falls in the NASDAQ and the Dow. Not every dot-com that sells frisbees on the Internet is going to make money, and some of those businesses are just now beginning to fail. That is what is driving the current market plunges, not Microsoft’s legal woes.
We can’t rely on the government to police Microsoft or come up with some solution that will increase competition–or quality–in the software market. It will have to be informed consumers who will make the difference. If enough people decide to desert the ranks of Microsoft users and select Linux or some other efficient and elegant new program, we may see a positive change. Until then, don’t expect any big changes in the status quo.