What will happen to Windows 98?

On the heels of Microsoft's agreement to offer a version of Windows that does not carry the Internet Explorer icon, attention once again is turning to the open-ended and high-stakes question of what the Justice Department's enforcement action against the software giant will mean for its much-anticipated release of Windows 98.

The dilemma surfaced in December 1997 when U.S. District Judge Thomas Penfield Jackson ordered Microsoft to separate its Internet browser from Windows 95 "or any successor version thereof." Most attorneys agreed that the language of the order could throw a monkey wrench into Microsoft's plans to release Windows 98, software that some believe will further integrate Internet functions into the operating system.

The monkey wrench question quickly was eclipsed, however, by government accusations that Microsoft had flouted the judge's order by removing Internet Explorer only from commercially worthless versions of Windows 95. Now it is resurfacing.

By just about everyone's account, the answer is far from clear. The Justice Department has said only that it is continuing to investigate other Microsoft practices, leading to speculation that the government may be preparing to launch a strike against Windows 98.

At a press conference announcing the settlement yesterday, Microsoft's chief operating officer didn't do much to clarify the situation. "The way you should think about Windows 98 is steady as she goes," said Bob Herbold, who added that the company continues to "vigorously" work on its plans as scheduled. "What the implications are in terms of other things we might have to do is unclear at this juncture." Microsoft has said it expects to ship Windows 98 by June.

Outside observers don't appear any more certain about what the ultimate fate of Windows 98 will be. For one thing, they point out, it's hard to speculate about any product that has yet to hit the market. It is especially hard, however, to speculate about the future of Windows 98.

At some points in Microsoft's ongoing antitrust battle, such as in comments made after the government filed its enforcement action, the software giant promised that Windows 98 would be "more fully integrated with the Internet." At other points, however, including in an October 1997 NEWS.COM interview with Brad Chase, the vice president of Microsoft's application and Internet client group, said that "the integration you get with IE 4.0 and Windows 95 is the integration you also get with Windows 98."

The ambiguity doesn't end there. Despite Jackson's preliminary injunction covering "successor versions" of Windows 95, many attorneys argue that a clause in the 1995 consent decree may provide grounds for an appeals court to eventually overturn the ruling.

"If the language in the consent decree that permits Microsoft to integrate new functions into its operating systems means anything at all, it has to mean that Microsoft has the right to do what it has announced it is doing in Windows 98," said Rich Gray, an antitrust attorney at Bergeson, Eliopoulos, Grady & Gray.

Microsoft has appealed Jackson's preliminary injunction, and the judges that are hearing the petition--two nominated by former President Ronald Reagan and the other by former President George Bush--are philosophically inclined to agree with Microsoft that the government has no business designing software.

But the opinion that the consent decree will not touch Windows 98 is by no means universal.

"The issue becomes, can they make a Windows 98 that integrates Internet Explorer without [at the same time] offering one that does not," said Ian Feinberg, an antitrust attorney at Gray Cary Ware & Freidenrich. He added that Microsoft may have lost some ground with yesterday's agreement.

"They have set a precedent for being required to offer a version of [an operating system] in which the Internet capability is disabled," said Feinberg. "They're going to have a hard time convincing a judge that they are incapable of doing it."

The open question, added Kevin Arquit, a former antitrust attorney with the Federal Trade Commission, puts pressure on the government, which wants to cover its bases but at the same time doesn't want to go overboard in litigating the matter.

"If they can successfully argue that the consent decree applies to Windows 98, that's probably a preferable way for them to go," said Arquit, now an attorney with Rogers & Wells in Washington, D.C. "If they have to bring a standalone antitrust case, there are more hoops to jump through."

Some of those hoops include proving that there clearly is a separate consumer demand for operating system and browsing products. While many argue that that such a distinction definitely exists today, the software market changes quickly. By the time a new case makes it to court, an operating system's inclusion of Internet features could be no different than the inclusion of screen savers or editors, features that now are considered standard parts of any operating system.

Added to the complex nature of the case is the fact that the government's track record in prosecuting cases under the Sherman Act, the 19th century statute governing antitrust law, is not especially strong. Over the last 50 years it has brought only two major cases. While one, against AT&T, successfully broke up the company's monopoly, another filed against IBM in the late 1970s languished for 13 years before it was dropped.

One antitrust attorney who asked not to be identified said that the same dynamics clouding the government's ongoing case against Microsoft would impede any new case challenging the integration of Internet features in Windows 98.

"They will be trying to convince a court to stop Microsoft from arguably improving their product because the result of it is to entrench it in its current monopoly position," said the attorney, a former employee in the Justice Department's antitrust division. "The government would present it in anticompetitive language and Microsoft would present it in freedom-to-compete language.