Merits of Microsoft case assessed

As the initial buzz died down today over the Justice Department's announcement that it had found Microsoft in violation of a 1995 court order, observers ranging from software developers to consumer advocates began to weigh in with cautious opinions.

"If it's just a question of changing some of the licensing terms to the OEM guys [original equipment manufacturers], it's not necessarily a big deal," said Jamie Love, director of the Consumer Project on Technology. "But if the Justice Department is actually saying that the browser can't be part of the OS, it may be a big deal."

Love is working with consumer advocate Ralph Nader to organize a two-day conference next month to address Microsoft's business strategies.

Two industry analysts, meanwhile, were skeptical about the potential ramifications of the government's charges.

"It could have a marginal effect to curb some of the more egregious acts that Microsoft engages in, and it could provide breathing room for other players," said Roger Kay of the research firm International Data Corporation. "Justice is alleging that the OEMs are not free to do what they want and must take the deal offered by Microsoft. But nothing will prevent them from doing it if they want to do it."

Independent analyst Richard Zwetchkenbaum added: "The DOJ is removing the stick, so now Microsoft will rely on the carrot. I'm wondering how many PC companies are really going to want to do anything other than get financial concessions out of this."

The Justice Department's charges, and Microsoft's replies to them, will be reviewed in the coming weeks by district court judge Thomas Jackson, who will then decide if the accusations have merit.

That the department took any action at all heartened another consumer advocate, who, like many of Microsoft's critics, has complained that the feds have been too slow to act.

"It's about time," said Audrie Krause, executive director of consumer group NetAction. "Justice has been clueless for a long time. With today's action, it looks like they finally get it."

But Krause's observations cut both ways. Others wonder if the government should be allowed to define operating systems and other software products.

"If Justice has its way, Microsoft will have to draw a line between the OS and the Web browser, a delineation that is becoming increasingly hard to draw," wrote Jim Balderston, senior analyst at Zona Research. "In this situation, will the Justice Department dictate to Microsoft how it will design and distribute its software? If Justice has that right and that right is affirmed by the courts, what prevents Justice from telling other companies how to design and distribute their software? Absolutely nothing."

One of these other companies with an interest in the antitrust fallout for browser applications is Netscape, which touched off the Microsoft investigation by filing a complaint alleging unfair practices last year.

Peter Harter, Netscape's public policy counsel, views the DOJ's action against Microsoft as a positive step. "Netscape is very supportive of the DOJ action taken today and Netscape believes in aggressively pursuing fair competition in the marketplace," he said.

Harter added that the DOJ's action went beyond the browser war and could affect anyone involved in e-commerce. He also downplayed the one product-vs.-two-products argument that promises to be at the center of the case.

"It's not about one product that is integrated into another, but rather, if Microsoft is conducting business in an illegal fashion that prevents innovation and competition."

Justin Stroud, senior developer for Internet development company Square Earth, generally agreed that the government has no right to define standards, be they technical or moral: "Stay out of my operating system and stay out of my home," he said. But Stroud also acknowledged that checks and balances are needed to prevent Microsoft from abusing its considerable influence.

Another software developer with a customized browser application in the works disagreed that the integration of the browser and the operating system is anticompetitive.

"We do believe this integration was very expected, and it makes sense from both the developer and consumer perspective," said Warren Adelman, vice president of business development for Bigfoot.

Judge Jackson's ruling will hinge on his reading of the 1995 consent decree and whether the Windows-Internet Explorer integration is one product or two.

"The battleground will be this: Is this the building of a separate product which creates an anticompetitive barrier for alternatives, or is it a true integration of a new product?" said Sam Miller, a former Justice attorney who was lead counsel during the original Microsoft antitrust investigation in 1994.

A recent editorial in the New York Times argued that antitrust law is outdated and doesn't apply to technology in the same way it did with railroads and steel companies, an opinion that is being echoed with rising frequency. One analyst suggested that a different shift in thinking is necessary.

"The browser is not an application of the PC's operating system but rather an application of the Internet," said John Robb, principal of Gomez Advisors. "This is the crux of the matter."

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