Proposed Microsoft Judgment Would Set Forbidding Precedents

For the IT industry competitors who have been rooting for the antitrust punishment of Microsoft Corp., the plaintiffs' April 29 filing of a Proposed Final Judgment should be a daunting moment of truth.

For the IT industry competitors who have been rooting for the antitrust punishment of Microsoft Corp., the plaintiffs April 29 filing of a Proposed Final Judgment should be a daunting moment of truth.

On the one hand, there is a breathtaking simplicity in the words that describe a tectonic shift in the IT landscape. "Microsoft shall submit ... a proposed plan of reorganization [that] shall provide for ... the separation of the Operating Systems Business from the Applications Business." Many observers, including PC Weeks editors, believe that this would be a constructive act.

On the other hand, those initial capital letters in phrases such as "Operating Systems Business" are a well-timed reminder that the law is ponderously precise in defining what might seem like common-sense terms. The law is capable of focusing its energies, in all their magnitude, on what may turn out to be the wrong point.

An antitrust judgment is like a nuclear-tipped ballistic missile: Once launched, its going to hit with a bang, and one can only hope that the target coordinates were properly defined.

Moreover, Microsofts competitors should be uneasily considering the bargain that they have made by enlisting government aid to restore competitive balance -- a balance that we might all wish had been more ably pursued in the marketplace. Whether or not the law is being correctly applied, Microsofts competitors may live to regret the precedent of inviting the government to take a hand in the game.

Power to PC providers

The Proposed Final Judgment speaks directly to one of the principal points in the earlier Findings of Fact in this case. The judge found that Microsoft, in its effort to prevent the emergence of platform-neutral middleware (such as Java-enabled browsers), barred personal computer makers from simplifying PC operations with alternative user interface shells.

PC makers such as Hewlett-Packard Co. affirmed that their early steps toward streamlined user environments reduced the rate at which new PCs were returned to dealers and reduced the cost of telephone support to new users. The judge may therefore be receptive to the proposal that "Microsoft shall not restrict a [PC maker] from modifying ... a Windows Operating System Product to ... display any user interfaces, provided that an icon is also displayed that allows the user to access the Windows user interface."

Microsoft had claimed a "right of integrity" under copyright law that would require PC makers "to deliver Windows to users as Microsoft designed it." The plaintiffs rightly rebut the notion that Windows is an audiovisual work in the same class as "Gone With the Wind," that replacing the Windows desktop with a streamlined startup shell is an "intentional distortion, mutilation, or other modification ... prejudicial to [Microsofts] honor or reputation" (in the words of the relevant clause in the Copyright Act).

Is tighter code worth less?

However pleased they may be with many provisions of the governments filing, Microsofts competitors should feel a chill when they confront the technical naïveté of some paragraphs in the Proposed Final Judgment.

For example, the proposal seeks to prevent Microsoft from using give-away marketing to gain market share in a key technology. (It was in just this manner that Internet Explorer piggybacked on Windows, quickly displacing Netscapes Navigator from near ubiquity on the early Web.) The government seeks to require Microsoft to offer versions of its operating systems that omit proposed new add-ons, with a mandate that Microsoft offer reduced royalty rates for the "core only" versions.

How would the government determine that required royalty reduction? The discount, the plaintiffs propose, would have to be in proportion to the size of the binary code for the add-on product, "as distributed separately from a Windows Operating System Product," compared to the size of the baseline Windows code. I leave to the reader the exercise of deciding what code would be in, say, Internet Explorer "as distributed separately"-- perhaps just the browser shell, with all of the other code hypothetically incorporated into facilities such as an HTML-based Help system?

A small amount of "separate" code would make for a small royalty reduction for a no-IE Windows, or conversely a small apparent cost for the more complete package. The boundary between two pieces of code, in any environment that makes extensive use of software components, can be placed to suit the convenience of the person who defines it.

It is also perverse to say that a given function, implemented in a smaller (and therefore probably faster) slice of software, is worth less than the same function implemented in a larger binary file -- but the expression of value as proportional to code size is part of the Proposed Final Judgment.

You asked for it, you got it

Do any of Microsofts industry antagonists really want to live in the market environment created by this judgment? For example, would Microsofts competitors want to offer and support older versions of their own outdated products for three full years after their upgrade? That three-year overlap would be imposed upon Microsoft, under the plaintiffs filing, and it seems to me that three years is rather a long time -- and yet, the market could come to see that as a standard period if Microsoft is forced to do this.

Also of concern is the mandated creation of a whistle-blower hot line within Microsoft. Its proposed that the company be required to hire a Chief Compliance Officer, with duties that include maintaining "a means by which employees can report potential violations on a confidential basis" and with a mandate to "report immediately to Plaintiffs and the Court any violation of this Final Judgment." This sounds rather like self-incrimination, which I didnt think is part of the way we did things in this country.

I feel similar trepidation about the clause in the Proposed Final Judgment that allows "representatives of a Plaintiff ... to inspect and copy ... memoranda, source code, and other records and documents" more or less at will. What creative technical team would work under that glass?

Lastly, I can only shake my head in dismay at the plaintiffs narrow definition of what constitutes a "Personal Computer," a crucial phrase that appears 17 times in the judgment and that limits many of its key provisions. The judgment defines a PC as a primarily single-user machine "that uses a video display and keyboard," thereby ignoring (for example) many proposed automotive devices that use voice commands and synthesized voice output and that respond to any of the vehicles occupants.

Automotive computing devices are currently recognized as a market segment with enormous growth potential, and one in which Microsofts Windows CE operating system could play an important role.

If this proposed judgment can overlook something thats already so well defined, I have to wonder what else it might be excluding with its narrow language in this and other areas -- developments that we have yet to anticipate but that might transform the industry during the 10 years over which this judgment is proposed to endure.