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Microsoft row upsets IT budget planning |
(Computerworld, 19 January 1998)
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Microsoft’s troubles with the U.S.
Department of Justice (DOJ) and the Japanese
Fair Trade Commission over the licensing of Internet Explorer with Win
95 have received considerably publicity in the press of late. These
actions, along with investigations currently underway by the European
Union and South Korea raise the question as to whether Microsoft can
continue with its plans to merge IE into Win98.
This issue is very important to IT Departments that are now engaged in annual planning for both budgeting and deployment. The news coverage has focussed on the blows being dealt by DOJ to Microsoft in the U.S. Courts. However, the participants in the case have recently been trying to paint the instant action onto a much larger canvas. Steve Ballmer of Microsoft has recently argued that Microsoft would not fight a battle so obviously bad for its PR if Microsoft's freedom to develop and incorporate new technologies was not at stake. For the DOJ, Assistant Attorney General Joel Klein in an hour long address to the Software Publisher's Association conference in California sought to emphasise the role of antitrust actions in protecting both domestic and international competition. TechLaw focuses, in this article, on the question of the impact of the DOJ Court case on Microsoft’s announced plans for Win 98 and the implications for IT Department planning. First, a recap. Microsoft signed a ‘Consent Order’ in 1994, to end a prior DOJ action, agreeing not to ‘tie’ OEM sales of it’s operating systems to purchases of other Microsoft product. From mid last year the DOJ started the process of bringing proceedings against Microsoft for allegedly breaching that order – in legal parlance being in contempt of the order. The DOJ said that this had occurred because Microsoft insisted that OEM’s installed IE with Win 95. Microsoft said in reply that it was entitled to do what it had for several reasons:
Judge Jackson heard the case and gave his decision on the 11th of December 1997. He found that Microsoft was not in contempt of the Consent Order because, effectively, the Consent Order was not clear:
Judge Jackson however did not leave the issue there and then went on to explore whether the tying practices were really fully complying with the Consent Order. Essentially, Judge Jackson said that because Microsoft had conceded that Word and Excel were separate products and, relying on the DOJ’s submissions that IE was separately marketed and that independent consumer demand existed for ‘browsers’, he found that it is possible that IE is a separate product:
In TechLaw’s view, Excel and Word are different from browsers. The integration with the Net is directly parallel to the evolution of the integration of the Win OS with the LAN. It seems the Judge and the DOJ cannot understand the difference between operating system development and applications. A function such as a browser can develop into an essential service of the operating system. Applications on the other hand are about user productivity. At this point the judgement embarks on an incredible journey in which the Judge found that irreparable injury could be suffered if Microsoft was not immediately stopped from tying IE with Win 95 on sales to OEM’s. In particular the Judge was concerned about Microsoft bundling IE 4.0 with Win 95 for OEM’s from February this year:
The Judge did not stop with the injunction but went on to order that a Special Master be appointed to investigate the issues and assist the Court.
Microsoft appealed and in the meantime issued a letter to its OEM’s on how to comply with the injunction. Last week saw more skirmishing. On Monday the 12th , Microsoft, having already gained urgency on the appeal, sought a review of the appointment on the Special Master on the grounds that he had illustrated a bias in e-mails in favour of Netscape. On Tuesday the 13th , the DOJ in turn brought a further action for contempt alleging that Microsoft has violated the December 11th Court Order in it’s communications with the OEM’s. In the latest turn, the Court issued an order soon after the end of the two day hearing on the 13th and 14th, dismissing Microsoft's motion to disqualify the Special Master. Judge Jackson has now ordered the parties to file briefs by Monday 19th and present their closing arguments later in the week. Many commentators are speculating that Judge Jackson may issue his ruling on the DOJ's contempt motion as early as the end of next week. Whether or not it succeeds the DOJ’s action is misconceived. The Judge’s decision sadly lacks insight into the real issues. It has been reported, incredibly, that the Judge decided that his Order could be implemented by ‘deleting IE himself’, as the ‘test’ as to whether his order could be implemented. Evidently, he did not consult Microsoft. If this is true, it explains some of the simplistic reasoning in the case. As the Apple OS story shows, a competitor such as Netscape cannot be protected against its own failure to deliver what the consumer wants (for an excellent look at the Apple story see Jim Carlton's article in the November 1997 issue of Wired Magazine "They coulda been a contender", or Carlton's book "Apple: The Inside Story of Intrigue, Egomania, and Business Blunders" from which the article was extracted). In this case many consumers want and expect the essential operating service of Net access to be integrated. Defragmenters and memory managers were, and browsers are now, in that category of essential services. Simply, the history of operating system development across all operating systems has been to merge essential utilities into the core product. As noted earlier, this issue has already been addressed directly by Microsoft’s Steve Ballmer in an interview on the 9th of January 98 published on infoworld.com. Ballmer outlines why the issue is so important to Microsoft by reference to further new features that users expect to be eventually integrated, in particular speech recognition. Reading the interview it is clear Microsoft has drawn the line on this issue and is prepared to fight all the way. Reading the on-line polls Microsoft’s position is being seen as ‘arrogance’. I question that. This issue is bigger than Win 95 and browsers. It is about control over innovation. There are plenty of Court cases where the Courts have expressly said that anti-trust law must not be used to inhibit innovation. Microsoft argues in its Motion for expedited consideration and for an expedited briefing schedule that:
In TechLaw's view, if the DOJ is ultimately successful in its proceeding against Microsoft there is a very real risk that at least some of the innovative and aggressively creative character that has driven the US software industry to world leadership will be lost. The DOJ itself has expressed a concern that it not become "the Better Business Bureau for this [software] industry.". It will be interesting to see how the DOJ reconciles this sentiment with its increasingly polemic approach to Microsoft. The DOJ has after all deliberately framed its case widely in terms of what Microsoft can and cannot integrate into its operating system. A win by the DOJ will impact on more than just Microsoft. Integration is a form of innovation endemic throughout the entire computer industry. If the Microsoft case principles are upheld, it has enormous implications for companies like Intel (what about amalgamation of functions on chips?) and eventually consumers. In TechLaw’s view it is for this reason that eventually, whether in the courts or by simply gutting Win 95 in favour of NT, Microsoft must succeed. So what does this mean to the IT manager/user today?
For copies of the actual documents filed by the parties we recommend the following sites: Good reference sites providing up to date coverage and archive material on the dispute include: For useful background material on antitrust policy generally see the antitrust.org site |
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