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Is the Government's Case Against Microsoft Running Out of Time?

Are anti-trust laws ill equipped to handle the world of information technology? Yes, according to economist Alan Reynolds. And if you listen long enough to his arguments you just may agree. Reynolds has been among those arguing that the U.S Government's case against Microsoft is based upon flawed reasoning that grows out of the government's inability to understand the contours, shifts and rhythm of high technology.

Reynolds is very critical of the judgment of Thomas Penfield Jackson who has sat over the case. Reynolds believes that the "findings of fact" and "findings of law" in the case are contradictory and shouldn't have resulted in the government's proposed remedy of a breakup of Microsoft into two separate companies.

In an article that appeared last month in the San Diego Union Tribune, Reynolds made the case that sooner or later, the government case against Microsoft will fall apart as the progress of technology reveals the bankruptcy of the U.S. government's position.

Here is an excerpt of that article that outlines the basis of Reynolds' position all underline, bold and italics are mine:

Many of Judge Thomas Penfield Jackson's most critical "findings of facts" were actually technological forecasts. The judge devoted dozens of pages to predicting why Internet appliances, wireless devices and non- Windows operating systems will not make a significant dent in the Windows PCs as the main vehicle for accessing the Internet. Whatever the merits of such "findings of fact", those facts are changing fast.

In the same week the judge announced his findings of law, America Online announced plans to put its formidable marketing muscle behind a new Gateway Internet computer that runs on Linux, not Windows. AOL simultaneously launched the first test version of the long-awaited Netscape 6.0 " Gecko" browser. If Netscape 6.0 pleases software critics, it may well displace Internet Explorer in next year's version 6.0 AOL software.

Netscape would instantly regain the lead over Microsoft in PC browsers, putting an abrupt end to the government's prolonged effort to preserve and protect Netscape's market share. This is only one of many emerging threats to the government's case.

In the government's case, America Online was never defined as a rival to Microsoft. Neither was Sun Microsystems or Oracle. Monopolies are not supposed to have such affluent and influential competitors. But not too long after breaking a few Windows with the Gateway-Linux device AOL will launch its interactive AOL-TV, with Time-Warner content. When it comes to big-screen Internet access, AOL-TV is a potentially huge alternative to any Windows box. Like the AOL-Gateway-Linux machine, AOL-TV clearly expands the "relevant market" and thereby erodes the government's claim that Windows has virtually no competition. This, too, is only one of many emerging threats to the government's case.

This fall, Windows and Internet Explorer begin to face yet another challenge from extremely sophisticated Internet-ready computers disguised as "game consoles," The Sony Playstation II is first, followed by similar 128-256 bit machines from Sega and Nintendo. These are not toys. They have the capacity to do anything a far more expensive PC can do, even serving as the locus of a digital home. Sega already offers is own Internet service and keyboard. Once consumers experience broadband 3-D graphics and Dolby sound with one of next year's remarkably powerful and inexpensive machines, the traditional PC could easily end up as little more than a spare typewriter and calculator. Microsoft is Japan's only known potential rival in this serious game, but Microsoft may become too distracted battling its own government.

...It does not take much imagination to see developments in any one of these many directions making toast of the government's anti-trust case within a year or two. Antitrust always moves at a very leisurely pace, befitting its antiquity. But technology transformations occur at the blinding speed of the Internet. Interest groups now pushing for draconian "structural' remedies in the Microsoft case are, whether they know it or not, actually demanding a legal battle so prolonged that it must end up embarrassingly out of touch with reality. This battle between the new economy and old antitrust, like the IBM case before it, appears likely to go through a period of creeping senility and then just die of old age.

Cedric Muhammad

Monday, May 22, 2000

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