Nation piece

[Andrew Shapiro <ashapiro@interport.net>]

  At 11:56 AM -0500 11/23/97, Louis Proyect wrote:
  >1) The latest Nation Magazine has a piece by Andrew Shapiro, who lurks
  >here, on "Hard Drive on Microsoft".  Unfortunately, the article has not
  >been included on the electronic version of the Nation, so I can't crosspost
  >it like I did Andrew's previous article. Perhaps he will feel motivated to
  >post it here, but if he doesn't, it is worth tracking down.
  
  Thanks for the mention, Louis.  Here it is.  Feel free to post elsewhere
  with c. notice intact.
  
  Andrew
  
  *******
  
  Andrew L. Shapiro
  
  HARD DRIVE ON MICROSOFT/ c. The Nation, December 8, 1997
  
  In a few weeks, Justice Department lawyers will go before Federal Judge
  Thomas Penfield Jackson in Washington and argue that Microsoft is in
  contempt of a 1995 antitrust consent decree, by which the company settled a
  government antitrust suit and agreed not to engage in certain practices.
  Justice claims that Microsoft has breached that agreement by forcing
  computer makers who license its Windows operating system to also license
  its Web browser, Internet Explorer. On its face, this would appear to be
  little more than an obscure dispute about software. And yet, no matter who
  wins, this latest round of *United States v. Microsoft* has the potential to
  be much more: a call to arms for renewed antitrust enforcement and a
  grassroots campaign for democratic values in the digital arena.
  
  The government's ongoing scrutiny of Microsoft is quickly becoming its most
  serious antitrust matter since the 1984 breakup of AT&T, and is arguably a
  litmus test of how corporate power will be reconciled with consumer rights
  in the information age. Antitrust is so talismanically focused on
  competition that it is easy to forget that the purpose of this body of law
  is not to protect companies but consumers. Usually, this means preventing
  unfair monopolies. Sometimes though, as in the case of utilities, it means
  have one closely regulated firm dominate the market. Either way, at the
  heart of antitrust is the idea that government must save capitalism from
  its own own excesses in order for markets to work at all
  
  Over the past few decades, antitrust has been ignored by regulators,
  winnowed by the courts and ridiculed by Chicago-school free marketeers such
  as Robert Bork. Yet there have been signs recently that the Clinton
  Administration is trying to make antitrust relevant again.  And none too
  soon. Microsoft is leveraging its market power--using predatory pricing and
  strong-arm tactics--to expand into almost every part of the new online
  communications and commerce sphere [see Shapiro, "Memo to Chairman Bill,"
  November 10]. It has the natural advantage of what economists call "network
  effects," which cause certain successful communications products to get an
  artificial boost, ultimately dominating a market and locking in customers.
  This prevents competing, perhaps superior, products from getting a fair
  shake. (If lots of people have VHS format video players, for example, it
  makes sense for you to buy VHS instead of Betamax. Unlike Windows, though,
  no one owns the VHS standard.)
  
  Microsoft's rapaciousness was laid bare in a recent internal memo: "We are
  challenging ... newspapers, travel agencies, automobile dealers,
  entertainment guides, travel guides, Yellow Page directories, magazines and
  over time many other areas." No wonder the company is perceived to be a
  threat by companies ranging from I.B.M. to Times Mirror to Bank of America.
  Nathan Myrhvold, chief technology officer, has acknowledged that the
  company wants to get a cut of every online transaction.  With $9 billion in
  cash, it can afford to bet on any number of paths for the future -- PC,
  cable, wireless, etc. (Bill Gates himself has invested heavily in
  Teledesic, a $10 billion satellite venture.) The company even makes an
  interactive Barney doll, for god's sake.
  
  Despite all this, Justice's current action is no sure thing. The consent
  decree prohibits Microsoft from forcing computer makers who license one
  product, such as Windows, to license any other product, such as Explorer.
  But a key clause states that the agreement does not prevent Microsoft from
  "developing integrated products." Justice argues in its brief that Windows
  95 and Explorer are distinct, pointing to the fact that they have been, and
  to an extent still are, developed and sold separately. Microsoft says
  that's irrelevant since "integrated" implies the combining of two discrete
  things and many Windows features existed as separate software before and
  after being incorporated. To resolve this dispute, Judge Jackson will be
  cast in the role of digital metaphysician, forced to ponder what, after
  all, an operating system is. My hunch is he'll agree with Microsoft that
  this is something that should be decided by software developers and
  consumers, not by the court.
  
  That's not to say that Justice's claim is without merit. The consent decree
  was meant in part to prevent Microsoft from using the licensing process to
  protect its operating system (OS) monopoly, and there is substantial
  evidence that it is trying coercively to do so. Microsoft controls upwards
  of 90 percent of the OS market. But, as Justice notes, the Windows hegemony
  faces a new threat from browser software made by Netscape and others that
  might do away with the need for an OS, and particularly from Java, the
  "platform independent" programming language developed by Sun Microsystems.
  Because it is mostly an open, nonproprietary standard, Java has quickly
  developed a following and is poised to become the lingua franca of the Web.
  By forcing Explorer on PC users, Microsoft is undoubtedly trying to foil
  the momentum of Java and other new Windows competitors.
  
  This would appear to be a classic example of illegal anticompetitive
  behavior. But Judge Jackson will probably not look favorably on the
  government's attempt to turn what is essentially a contract dispute into a
  full-scale antitrust litigation. Moreover, Microsoft will argue that its
  "monopoly" can no longer be assumed if Netscape and Java pose such a
  distinct threat. In this round, then, Justice is unlikely to get the relief
  it seeks -- preventing Microsoft from requiring Windows 95 licensees to
  take Explorer. Even if it did, the remedy would probably be moot soon
  because Microsoft intends to integrate a browser into future versions of
  its OS, such as Windows 98. To prevent this, Justice would probably have to
  initiate an entirely new antitrust lawsuit, which would take years and then
  still might not succeed, given today's weak antitrust precedents.
  
  All of which sounds like Microsoft wins and the consumer loses; but it's
  not so simple. While Assistant Attorney General Joel Klein and his
  colleagues at the Antitrust Division will never admit it, hauling Microsoft
  into court now is as much a strategic and public relations move as a legal
  one. Antitrust officials at Justice and the F.T.C. have been trying for
  years to rein in this giant, with little success. The brilliant thing about
  using the consent decree is that Justice can keep Microsoft on the
  defensive, raise consumer awareness about the company's cutthroat tactics,
  and encourage industry to come forward with evidence of unfair dealing.
  Legal purists may not like it, but these hardball tactics can work.
  
  Since Justice announced its charge on October 20, reports of other shady
  practices by Microsoft have surfaced; Senator Orrin Hatch has held
  hearings; and Ralph Nader convened a two-day conference in Washington that
  drove Gates into a tizzy (he ranted to shareholders about a "witch hunt").
  Though the event would have been better had Gates accepted Nader's
  invitation to participate, a few interesting ideas were proposed. Antitrust
  expert Lloyd Constantine suggested amending the Sherman Act to make
  leveraging monopoly power from one market into another a clear violation of
  the statute. Economist Garth Saloner argued that standards made dominant
  through network effects should not necessarily remain proprietary. And
  Jamie Love of the Consumer Project on Technology said that government could
  use its purchasing power to keep markets competitive. There was even a
  little levity, as attorney Gary Reback recounted the story of what happened
  after Microsoft bought the Funk & Wagnalls encyclopedia for a cd-rom
  edition: the entry on Gates describing him as ruthless morphed into one
  reporting that "he is known for his personal and corporate contributions to
  charity and educational organizations."
  
  Hearings and conferences are just a first step toward educating ourselves
  about the ways in which Microsoft and other large companies are threatening
  much of the Net's potential. Microsoft's tendency to restrict content and
  bolster Big Media is antithetical to the healthy chaos of cyberspace and
  should be opposed. The Java-Windows battle highlighted by Justice also
  demands our attention. Arcane as these debates may seem, we must become
  familiar with the way in which these tools affect our interaction with
  information and the world at large. As Steven Johnson writes in his
  fascinating new book, *Interface Culture*, technologies in the digital age
  "serve as buffers, translators, tour guides." As such, we need to seek out
  those interfaces that best reflect our political aspirations. If Java
  allows for more user control and flexibility than Windows, then perhaps it
  deserves our support (see javalobby.org). But there are other standards,
  like Linux, that are even less proprietary than Java. The cyberpolicy
  groups that mobilized netizens on free speech and privacy should organize a
  campaign to inform us about these issues and to keep competition online
  fair and robust.
  
  It would be nice if there were a simple solution to this
  quandary--nationalize Windows? break-up Microsoft?--but there isn't. What
  we can do now is press antitrust authorities at the state, federal, and
  international levels to scrutinize Microsoft's practices (as we do the same
  ourselves); explore the possibility of strengthening antitrust laws to
  compensate for the regressive rulings of the last few decades and the
  challenges of the digital era; and actively support interfaces and
  standards that are as open and democratic as possible. Judge Jackson may
  not find Microsoft in contempt. But if the company fails to changes its
  ways, the consumers of the world eventually will.
  
  Andrew L. Shapiro (ashapiro@thenation.com), a fellow at Harvard Law
  School's Center for Internet & Society, is writing a book on the politics
  of new media.
  
  END
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