Not long ago, I went to Washington for a dinner given by a friend. She wanted to commemorate the fifth anniversary of the end of the Microsoft antitrust trial, which she had covered for a news agency and I had covered for Fortune magazine.
In all, about 10 of us made it to the dinner, and it wasn't long before we were regaling one another about the "good old days" of the trial - laughing at the way Judge Thomas Penfield Jackson used to roll his eyes at Microsoft's witnesses, and recalling how the superlawyer David Boies, whose daily skewering of Microsoft gave the trial most of its entertainment value, would put straws in his jacket pocket when he went out drinking with us so he could keep track of how many drinks he had.
What I remember most of all about the Microsoft trial, though, was how momentous it felt - surely, the antitrust trial of the century! The rest of Washington was obsessed with Monica Lewinsky. Not us. We pored through e-mail messages suggesting that Microsoft had wanted to "cut off Netscape's air supply" - Microsoft's efforts to crush Netscape was at the heart of the case - and wondered if Judge Jackson would have the nerve to break the behemoth in half.
As it turns out, Judge Jackson did have the nerve. But he made several fatal mistakes - including talking secretly to the news media - and the District of Columbia Circuit, while upholding his finding that Microsoft had abused its monopoly power, took the case out of his hands and sent it to another judge. Once the Bush administration took power, the new Justice Department quickly settled on terms largely favorable to the company
Here we are five years later, and the technology landscape is drastically transformed. Google, a company that was founded just as the trial was getting under way, is now widely (and correctly) viewed as the most serious threat to Microsoft's desktop hegemony since Netscape. Linux, the open-source operating system, has made real inroads in the server market - a market Microsoft had counted on for growth.
AMONG competitors, Microsoft is still respected, but it is not feared the way it used to be. It has become a sluggish, bureaucratic company that, for instance, is going to be at least a year late with a new operating system, called Longhorn, that the world needs now because it is supposed to make computing more secure. Its stock hasn't moved in years.
On the other hand, Microsoft still has the same two powerful desktop monopolies it had before the antitrust trial: the Windows operating system and the Office suite of applications. For all of Linux's success in the server market, it is a negligible presence on the desktop. Even Apple's impressive revival has made barely a dent in Microsoft's desktop stranglehold. And preserving that monopoly still seems to be Microsoft's fundamental business strategy, at least when it comes to personal computing.
All of which now makes me wonder: when you come right down to it, did the antitrust trial of the century make a whit of difference?
On the margins, at least, the trial certainly did bring about change - though not always for the better. Why is Microsoft so bureaucratic? Partly, that's the natural course any big company takes as it gets bigger. But it certainly doesn't help matters that, as the Microsoft general counsel, Bradford L. Smith, puts it, "Every single decision the company makes with respect to Windows is made with a level of antitrust legal advice." Gee - do you think that might gum up the works a little?
The aftereffects of the trial also help explain why Microsoft is not as feared as it once was. Under the terms of the settlement, Microsoft can no longer give better terms to computer manufacturers it considers "friends." Manufacturers can cut deals to pre-install RealNetworks' media player, or Google's toolbar, without fear of retribution from its most important vendor.
The trial also woke Microsoft up to the fact that it was truly hated in Silicon Valley. It's been trying to make nice ever since. It has settled a series of private antitrust suits - for some $3.5 billion - brought by rivals like Sun Microsystems. And it has worked assiduously to turn former enemies into allies. (Sun, which now holds joint news conferences with Microsoft, is a prime example.) At Microsoft, there is a lot less "my way or the highway" than there used to be.
This is not an insignificant change - but it's not what the antitrust trial was really about. The central issue was whether the company had an inalienable right to bundle new software products - a browser, a media player, antivirus software, a "ham sandwich," as Microsoft once put it - into its operating system. Whenever it does so, of course, it gives itself a huge home-court advantage: its software is suddenly available on over 90 percent of the world's PC's, and is usually the "default" product as well.
During the trial, Microsoft argued that when it added features to Windows it was helping consumers. To the company, its right to "innovate" - as it invariably called the practice - was sacrosanct. The government argued that folding its version of a competitor's product into its monopoly operating system was a deeply anticompetitive act. And here's something that might surprise you: The Microsoft trial did not settle this critical question.
Although the D.C. Circuit looked skeptically on the "tying" claim (as it is called), it did not overturn Judge Jackson's ruling that Microsoft had illegally tied its browser, Internet Explorer, to Windows. Instead, it sent that part of the case back to the lower courts for further review. When the Justice Department settled with Microsoft, the issue was left hanging.
The European Union has been jousting with Microsoft over a different product - media players - but on the same issue. That's not resolved yet either. Last year, the union ruled that Microsoft had abused its monopoly power by folding its media player into Windows at the expense of the rival RealNetworks. Although Microsoft has paid a large fine and is being forced to put out a version of Windows without a media player - called Edition N (which, by the way, not a single computer manufacturer has agreed to use) - it is appealing the decision in the courts.
During negotiations to settle the case, Microsoft offered to load Real's media player along with its own. But it refused to agree to strip out its own player, and it appears willing to litigate that point to the bitter end. Mr. Smith of Microsoft says the appeal process could take three years - in a proceeding that is already six years old.
Which brings us back to Google. The Google threat is not so much that it has the bulk of the Internet search market. Rather, Google is a serious and creative software company that has the potential to roll out new Web-based applications that will allow consumers to do on the Web things they now do in Windows.
In the old days, said Tod Nielsen, a former Microsoft executive, the company would have raced to add some kind of quick-fix Internet search "functionality" to Windows. "And we would have found a way to attack their business model, too," he added. That this has not happened is, to my mind, the most powerful evidence that the company's behavior has been tempered by the antitrust trial.
On the other hand, it seems quite likely that when Longhorn is finally rolled out - currently scheduled for late 2006 - it will have some kind of Internet search feature. It will be easy to use, seamlessly integrated with Windows - and will have been seriously vetted by the lawyers, so that it at least minimizes any potential antitrust problems.
Although Microsoft insists it has not made a final decision on whether to include Internet search in Longhorn, Google has no doubt that it's on the way; it says as much in its latest annual report . So can the kinder, gentler, tempered-by-the-trial Microsoft do to Google what it did to Netscape lo these many years ago? Google has serious profits, a ton of talented engineers, a great brand name, and, in Eric Schmidt, a chief executive who has gone up against Microsoft twice before, at Sun and at Novell. Microsoft has Windows. That's the main thing that hasn't changed in the wake of the antitrust trial. That used to be enough. We're going to find out if it still is.
Source:NY Times (registration required)
In all, about 10 of us made it to the dinner, and it wasn't long before we were regaling one another about the "good old days" of the trial - laughing at the way Judge Thomas Penfield Jackson used to roll his eyes at Microsoft's witnesses, and recalling how the superlawyer David Boies, whose daily skewering of Microsoft gave the trial most of its entertainment value, would put straws in his jacket pocket when he went out drinking with us so he could keep track of how many drinks he had.
What I remember most of all about the Microsoft trial, though, was how momentous it felt - surely, the antitrust trial of the century! The rest of Washington was obsessed with Monica Lewinsky. Not us. We pored through e-mail messages suggesting that Microsoft had wanted to "cut off Netscape's air supply" - Microsoft's efforts to crush Netscape was at the heart of the case - and wondered if Judge Jackson would have the nerve to break the behemoth in half.
As it turns out, Judge Jackson did have the nerve. But he made several fatal mistakes - including talking secretly to the news media - and the District of Columbia Circuit, while upholding his finding that Microsoft had abused its monopoly power, took the case out of his hands and sent it to another judge. Once the Bush administration took power, the new Justice Department quickly settled on terms largely favorable to the company
Here we are five years later, and the technology landscape is drastically transformed. Google, a company that was founded just as the trial was getting under way, is now widely (and correctly) viewed as the most serious threat to Microsoft's desktop hegemony since Netscape. Linux, the open-source operating system, has made real inroads in the server market - a market Microsoft had counted on for growth.
AMONG competitors, Microsoft is still respected, but it is not feared the way it used to be. It has become a sluggish, bureaucratic company that, for instance, is going to be at least a year late with a new operating system, called Longhorn, that the world needs now because it is supposed to make computing more secure. Its stock hasn't moved in years.
On the other hand, Microsoft still has the same two powerful desktop monopolies it had before the antitrust trial: the Windows operating system and the Office suite of applications. For all of Linux's success in the server market, it is a negligible presence on the desktop. Even Apple's impressive revival has made barely a dent in Microsoft's desktop stranglehold. And preserving that monopoly still seems to be Microsoft's fundamental business strategy, at least when it comes to personal computing.
All of which now makes me wonder: when you come right down to it, did the antitrust trial of the century make a whit of difference?
On the margins, at least, the trial certainly did bring about change - though not always for the better. Why is Microsoft so bureaucratic? Partly, that's the natural course any big company takes as it gets bigger. But it certainly doesn't help matters that, as the Microsoft general counsel, Bradford L. Smith, puts it, "Every single decision the company makes with respect to Windows is made with a level of antitrust legal advice." Gee - do you think that might gum up the works a little?
The aftereffects of the trial also help explain why Microsoft is not as feared as it once was. Under the terms of the settlement, Microsoft can no longer give better terms to computer manufacturers it considers "friends." Manufacturers can cut deals to pre-install RealNetworks' media player, or Google's toolbar, without fear of retribution from its most important vendor.
The trial also woke Microsoft up to the fact that it was truly hated in Silicon Valley. It's been trying to make nice ever since. It has settled a series of private antitrust suits - for some $3.5 billion - brought by rivals like Sun Microsystems. And it has worked assiduously to turn former enemies into allies. (Sun, which now holds joint news conferences with Microsoft, is a prime example.) At Microsoft, there is a lot less "my way or the highway" than there used to be.
This is not an insignificant change - but it's not what the antitrust trial was really about. The central issue was whether the company had an inalienable right to bundle new software products - a browser, a media player, antivirus software, a "ham sandwich," as Microsoft once put it - into its operating system. Whenever it does so, of course, it gives itself a huge home-court advantage: its software is suddenly available on over 90 percent of the world's PC's, and is usually the "default" product as well.
During the trial, Microsoft argued that when it added features to Windows it was helping consumers. To the company, its right to "innovate" - as it invariably called the practice - was sacrosanct. The government argued that folding its version of a competitor's product into its monopoly operating system was a deeply anticompetitive act. And here's something that might surprise you: The Microsoft trial did not settle this critical question.
Although the D.C. Circuit looked skeptically on the "tying" claim (as it is called), it did not overturn Judge Jackson's ruling that Microsoft had illegally tied its browser, Internet Explorer, to Windows. Instead, it sent that part of the case back to the lower courts for further review. When the Justice Department settled with Microsoft, the issue was left hanging.
The European Union has been jousting with Microsoft over a different product - media players - but on the same issue. That's not resolved yet either. Last year, the union ruled that Microsoft had abused its monopoly power by folding its media player into Windows at the expense of the rival RealNetworks. Although Microsoft has paid a large fine and is being forced to put out a version of Windows without a media player - called Edition N (which, by the way, not a single computer manufacturer has agreed to use) - it is appealing the decision in the courts.
During negotiations to settle the case, Microsoft offered to load Real's media player along with its own. But it refused to agree to strip out its own player, and it appears willing to litigate that point to the bitter end. Mr. Smith of Microsoft says the appeal process could take three years - in a proceeding that is already six years old.
Which brings us back to Google. The Google threat is not so much that it has the bulk of the Internet search market. Rather, Google is a serious and creative software company that has the potential to roll out new Web-based applications that will allow consumers to do on the Web things they now do in Windows.
In the old days, said Tod Nielsen, a former Microsoft executive, the company would have raced to add some kind of quick-fix Internet search "functionality" to Windows. "And we would have found a way to attack their business model, too," he added. That this has not happened is, to my mind, the most powerful evidence that the company's behavior has been tempered by the antitrust trial.
On the other hand, it seems quite likely that when Longhorn is finally rolled out - currently scheduled for late 2006 - it will have some kind of Internet search feature. It will be easy to use, seamlessly integrated with Windows - and will have been seriously vetted by the lawyers, so that it at least minimizes any potential antitrust problems.
Although Microsoft insists it has not made a final decision on whether to include Internet search in Longhorn, Google has no doubt that it's on the way; it says as much in its latest annual report . So can the kinder, gentler, tempered-by-the-trial Microsoft do to Google what it did to Netscape lo these many years ago? Google has serious profits, a ton of talented engineers, a great brand name, and, in Eric Schmidt, a chief executive who has gone up against Microsoft twice before, at Sun and at Novell. Microsoft has Windows. That's the main thing that hasn't changed in the wake of the antitrust trial. That used to be enough. We're going to find out if it still is.
Source:NY Times (registration required)