Ruling Poses No Risk Of Government Control Of Software

The software industry is not at risk of inviting government control as a consequence of possible sanctions in Microsoft Corp.'s antitrust case.

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The software industry is not at risk of inviting government control as a consequence of possible sanctions in Microsoft Corp.s antitrust case.

An antitrust violation involves three elements. There must exist monopoly power -- the ability to set prices in a market without concern for competitors response. There must be anti-competitive abuse of that power, reducing consumer choice or maintaining unreasonably high costs. And there must be harm to consumers as a result.

The findings of fact released on Friday by U.S. District Court Judge Thomas Penfield Jackson establish all three elements as proved to the courts satisfaction. In that important sense, this case is over.

Now begins the hand-wringing over whether the industry can afford the satisfaction of seeing Microsoft held to account for its actions. Dire warnings are heard that this case moves control of the software industry into government hands, that the evolution of software will stagnate when the government defines such terms as "integrated product" or "operating system."

What the Internet has wrought

But the governments legal interest must be provoked by the existence of power to control the prices paid or other vital elements of a market. It is not a crime to act like a jerk and demand unreasonable terms from ones customers, unless one has the monopoly power that makes such demands impractical to ignore. The standards-based environment of the Internet makes such monopoly power a thing of the past.

Jackson narrates a harrowing tale of Microsofts manipulations of the market for Internet browsers, then delivers the anticlimactic conclusion: "Most developers continue to insist that their Web content be more-or-less as attractive when accessed with Navigator as it is when accessed with Internet Explorer."

On the back side of the Web, Microsoft itself has acknowledged that TCP, HTTP and XML are the three defining standards that must shape its Windows DNA 2000 initiative. If Microsofts goal was to wrap the Web around its own technologies, then Microsoft has largely failed.

The judge can state as a fact that Microsofts actions have distorted competition -- in fact, he has so stated in several areas -- but he also finds that "the inclusion of Internet Explorer with Windows at no separate charge increased general familiarity with the Internet and reduced the cost to the public of gaining access to it, at least in part because it compelled Netscape to stop charging for Navigator. These actions thus contributed to improving the quality of Web browsing software, lowering its cost, and increasing its availability, thereby benefiting consumers."

Though definite and severe in language, the findings of fact in the Microsoft case present a picture of a marketplace that was galvanized by the existence of dominant standards to grow at phenomenal rates, creating vast opportunities for many new companies. If only all competition could be this distorted.

The government will now apply whatever sanctions it sees fit in response to Microsofts anti-competitive tactics. The dogs will bark, but the caravan will move on.