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NT antitrust's next battleground

Microsoft's OS that runs corporate workstations and servers is likely to become the next high-profile battleground, regulators and outside observers say.

While the marriage of Microsoft's Internet Explorer to its Windows 95 and Windows 98 operating systems so far has been the most visible front in the war between the company and antitrust enforcers, Windows NT is likely to become the next high-profile battleground, according to regulators and outside observers.

Microsoft has already announced plans to succeed Windows 98 with Windows NT-based technology, now a souped-up operating system that runs corporate workstations and servers. Antitrust regulators, already criticized by some for going after Windows 95 too late in the game, are determined not to make the same mistake again.

"Obviously, Java and NT are the next issues and the issues over which I believe we can have a dramatic impact because we still have time," said one state official who asked not to be named. "We won't run into the problems of eminent distribution of the product" with Windows NT, which runs a fraction of workstation and server systems in operation today, but represents the fastest growing portion of Microsoft's business.

The official added that investigators now are determining whether Microsoft's migration to NT constitutes an illegal extension of Microsoft's alleged monopoly power in the market for desktop operating systems. Among other things, they are looking at the integration of existing Microsoft products, such as those found in Microsoft BackOffice, with Windows NT 5.0, the update rumored to be released early next year.

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Windows NT next for DOJ? Investigators may also look at other practices associated with NT, such as a requirement that applications developers design programs that run on both Windows 95 and Windows NT to display Microsoft's Windows Compatible logo. True or not, such reports are sure to fuel allegations that Microsoft is leveraging its dominance in Windows 95 and Windows 98 to promote NT.

In addition to building a case charging illegal maintenance or illegal extension of an existing monopoly, regulators may try to make use of a federal judge's recent decision in a separate case that Intel held a monopoly in the market for Intel-based chips. (See related story)

Defining a market has always been crucial in determining whether a given product constitutes a monopoly. If a market for operating systems, for instance, includes small handheld devices, Windows' influence would be considered relatively small. If, on the other hand, the market was defined more narrowly to include only Intel-based machines, Microsoft's control would be considerable.

Translating the market analysis in the Intel decision to Microsoft gives regulators unprecedented new advantages. Under such a scenario, Windows NT--or other popular products, for that matter--could be deemed a market in and of itself, for purposes of antitrust law.

Rich Gray, an antitrust attorney with Bergeson, Eliopoulos, Grady & Gray, said prosecutors taking on Windows NT would have to show either that Microsoft used the dominance of Windows 95 and Windows 98 to prop up NT, or that, based on the Intel decision, NT is a market in and of itself. If they were able to accomplish either, Windows NT could replace Windows 98 as the center of future antitrust battles.

"It's the browser issue [in the current investigation concerning Windows 98] multiplied by many, many different technologies, ranging from audio and video streaming, to voice recognition, to authentication, and other security issues," said Gray, referring to just a few of the features being integrated into NT. "The potential issues in product integration at the Windows NT level are almost endless."

Rick Rule, a Microsoft consultant who headed the Justice Department under the decidedly free-market Reagan administration, discounted the chances of a case successfully being brought against NT.

He explained that, contrary to assertions by Microsoft competitors and others, including Sen. Orrin Hatch (R-Utah), no one has ever proven that Microsoft has a monopoly in any market.

"I think pretty clearly the law would require someone to show that Microsoft has a monopoly in some market to begin with," said Rule, now in private practice at Covington & Burling. Even if prosecutors proved Microsoft held a monopoly, Rule added, "you still have to prove with respect to NT that Microsoft has used exclusionary or predatory conduct and that the conduct creates monopoly power or at least the dangerous possibility of monopoly power."

He said government inquiries into NT were nothing new. "Microsoft is in a position today where it can't expect to sneeze without having the government inspect the handkerchief," he said.

There is no reason to believe a legal challenge of Windows NT will ramp up any time soon. For one thing, prosecutors on both state and federal levels appear to have their hands full deciding whether to take action against Windows 98, which Microsoft says will be shipped to computer makers Friday.

"We can't really speculate on what type of action the states or the Justice Department may bring," Microsoft spokesman Tom Pilla said. "We continue to work with them to make sure they have the information they need."

And in the meantime, regulators will want to think long and hard about the issue before they act.

Said Bergeson, Eliopoulos's Gray: "The real question on Windows NT is how much influence and power should Microsoft be able to exercise over the many different software products that do now or could in the future reside on a server. The proper role of the government is to come in as cop and say [when Microsoft] has gone too far."