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Microsoft makes case to Congress

The software maker sends a letter to Capitol Hill leaders claiming the proposed breakup would prevent the addition of significant new features to Windows for up to a decade.

WASHINGTON--Microsoft sent a letter to Capitol Hill leaders claiming the recently proposed breakup of the company would prevent the addition of significant new features to Windows for up to a decade.

The proposed remedy amounts to "an elaborate set of software engineering and business restrictions" that would forestall Windows development for the near future, according to the letter sent last week from the software giant's Washington office.

Many of the arguments from the letter Breaking the giant: Special Coverage will likely be incorporated into a brief that Microsoft is scheduled to file tomorrow. The court brief will outline how Microsoft thinks it should be punished in the landmark antitrust case, following the government's call for a split of the software giant. Although the company is required to propose business remedies, many industry observers expect Microsoft to simply reiterate its stance that it did not violate existing antitrust law.

Not surprisingly, Microsoft told congressional leaders the breakup proposal would unfairly punish the company and cripple its ability to compete. The company, which in the letter referred to the proposed operating system company as OS Co. and the applications operation as Apps. Co., argued such a division jeopardized existing and future products.

"The DOJ plan outlaws an innovative Microsoft product, Microsoft BackOffice, by assigning parts of the product to the OS Co. and part to the Apps. Co.," the letter said. The company also said the "DOJ plan appears to prohibit the development of exciting new products now under development at Microsoft, such as new versions of Web TV, the Xbox game console."

The Redmond, Wash.-based software maker added that "the regulations relate to products, markets and issues that were not involved in the DOJ's lawsuit against Microsoft."

Microsoft routinely updates Washington lawmakers on its activities but has done so more often since U.S. District Judge Thomas Penfield Jackson issued his stinging "findings of fact" in November. In February, for example, Microsoft sent an email calling any breakup proposal "extreme and unwarranted." Last month, the company mailed a letter to stockholders suggesting they contact elected officials about the case. Letters had been sent to congressional leaders earlier as well.

"Considering the concerns raised by consumers all over the country and many affected by the far-reaching and regulatory decision to try and break up Microsoft, we certainly wanted to share that information with lawmakers and the negative impact the government's proposal will have for their constituents and the economy," said Microsoft spokesman Jim Cullinan.

While the company's Washington lobbying efforts might do little in the short term, they could help pave the way for smoother relations with the next administration, said George Washington University Law School professor Bill Kovacic.

"Another administration could make things go a lot easier on Microsoft," he said. Winning support now could even make the case go away later on, he added.

Ken Wasch Critics of the company, such as Ken Wasch, president of the Software Industry and Information Association (SIIA), said that the recently mailed letter, which succinctly laid out the government's proposal, liberally interpreted its impact on Microsoft. The letter, according to Wasch, said "things that just aren't true."

SIIA and Microsoft have been at odds since the trade group filed a "friend of court" brief on behalf of the government. Microsoft retaliated by withdrawing its membership in the organization.

In the letter, Microsoft told congressional leaders the government's "regulations constrain, rather than promote, competition and innovation. For example, the regulations explicitly forbid Microsoft from improving the Internet Explorer software in Windows."

Wasch said: "Nothing could be further from the truth," adding that Microsoft "would have no restrictions on its software products or lines of business." The government's proposal would not restrict Microsoft from adding new features to Windows or developing new Internet applications. "What it may not do is bind middleware products to the operating system unless the end user or computer manufacturer can easily remove it," he said.

Wasch further stated that the company's characterization of the effects of a breakup was "incorrect." A division only "would effectively prohibit the OS Co. and the Apps Co. from engaging in technical discussions to develop new versions of Windows and Office," he said.

The government wants to prevent the two entities from recombining and to stop joint ventures "because what (the Justice Department) and the states are trying to do is get the two units to compete," Wasch said. The units "may provide technical information to one another in the same fashion as they do to other software and hardware companies."

In the letter, Microsoft says the government's plan "would ban the addition of any significant new end user features for up to 10 years" and "prevent consumers from accessing significant features of the operating system."