How to Bust His Trust

[Mitch Stone <mstone@vc.net>]

http://www.nytimes.com/library/magazine/home/19991212mag-wordimage.html 

WORD & IMAGE BY MAX FRANKEL 

How to Bust His Trust 
Bill Gates should have to choose between his  Windows and our wagons. 


The judicial finding that Microsoft has attained, enjoyed and abused  the 
power of a monopoly reached me at a fortuitous moment. I  instantly knew 
what punishment fit the crime. 

Just a few hours earlier, I had been reading about the tycoon known for 
"his visionary leadership, his courageous persistence, his  capacity to 
think in strategic terms, but also his lust for  domination, his 
messianic self-righteousness and his contempt for  those shortsighted 
mortals who made the mistake of  standing in his way." 

Bill Gates, the visionary predator? No. John D. Rockefeller Sr., the  
"Titan" of Ron Chernow's splendid biography. The parallels are  uncanny. 
Also instructive. 

Each man seized upon a product that would shrink the earth and define  a 
century. Each employed it to amass incomparable personal wealth.  What 
refined oil did for Rockefeller, processed information has done  for 
Gates. Both brilliantly appropriated the creativity of other  folks. Both 
used that control to gobble up competitors and to crush  all challengers. 
And when finally challenged in court, both  shamelessly denied the 
undeniable evidence of their monopolistic  ambitions and predatory 
conduct. 

All this coincidental instruction in the behavior of Microsoft and  
Standard Oil left me wondering whether Americans would ever learn to  
overcome the fateful flaw in our free-market system: the very greed  that 
makes us economically creative also repeatedly makes us  creatively 
criminal. 

But I was also left full of admiration for Judge Thomas Penfield  
Jackson's quick grasp of the world of Windows and ways of the Web. He  
mastered the intangibles of Bill Gates's vision much sooner than  anyone 
understood old Rockefeller's devilish designs. And the judge's  dense, 
200-page indictment of Microsoft was devastating enough to  evoke Gates's 
interest in a deal that might yet rescue him from a  lifetime of 
litigation. 

I don't know what either Microsoft or the trustbusters of the Justice  
Department would deem a proper settlement of the case. But I think  Judge 
Jackson should not close the affair until he can reassert an  elementary 
principle of fair commerce: competition can flourish only  if the roads 
to market are equally available to all competitors. 

There's no way to test the market value of a dozen eggs if only one  
farmer owns a wagon to bring them to town. And if every farmer has a  
wagon, the market still will not work if one of them collects the tolls 
for use of the road.  For foxy old Rockefeller, the road was a pipeline, 
then a railroad  track, from refinery to port, and he conspired to 
dictate the tolls  for all those roads.  Inevitably, he not only paid 
less than any  competitor to ship his own oil; in time, he even  
commanded a rebate -- called a "drawback" -- from the tolls paid by  his 
rivals. 

Decades passed before enough Americans understood how they were being  
cheated and wrote broad antitrust laws that might protect them  against 
similar betrayals of capitalism. Those are the laws that  Judge Jackson 
now strains to enforce on Bill Gates. But he won't  succeed until 
Microsoft is made to choose between running the wagons  and owning the 
road. 

In simpler days, this was sometimes called the "common carrier" rule.  If 
you owned the track, you had to convey everybody's freight fairly.  If 
you owned the wire, you had to connect everybody's phone and carry 
everybody's  message. If you owned a movie house, you had to be available 
for  anybody's films. If you owned a cable, you had to carry all  
television programs. You could be a common carrier or the creator of  
something to be carried, but not both. 

Simple but also quaint. Technology has a way of overtaking ideology  and 
blurring such distinctions. The cable companies learned to make  their 
own TV shows and to discriminate against rivals. Now the cable  owners 
think they can also become phone companies and the phone companies are 
angling to send  television shows to my computer. And all these wired 
companies are  being challenged by gadgets that send messages and 
pictures invisibly  through the air. What's an egg anymore? Who's a road? 

Bill Gates thought his virtual monopoly could never be understood in  the 
old physical terms. And if he had not left a telltale trail of  e-mail, 
the Feds might never have made a plausible case against him.  But given 
the evidence from Gates's own computer, Judge Jackson well  understood 
that Microsoft's imperial triumph had been deliberately  and probably 
illegally engineered. 

Gates built Windows, a good road to the information market, and then  
schemed brilliantly to make it practically the only road that PC  owners 
could navigate. Nearly all wagons -- computer programs -- had to fit on 
his tracks.  Gates's own wagons -- the Microsoft programs -- rode free on 
his  Windows highway, and those of his allies were waved onto low-toll  
express lanes.  Rockefeller rebates redux. 

Gates had the market effectively cornered until the Internet produced  
the prospect of an alternate, Window-less turnpike. Microsoft's  
long-suffering competitors foresaw a chance of bypassing the personal  
computer and giving people a much simpler machine that would "borrow"  
the computing power and programs they periodically need via the  
Internet. 

Belatedly aroused, Gates poured all his monopoly power into blunting  
that threat. He conspired to destroy rival dreamers, like Netscape,  so 
that his Windows would remain the universal gateway to the  Internet. But 
he was found to have rigged contracts and prices --  while plotting to 
control the Internet -- and the remaining question  is how best to bust 
his trust. 

The remedy, now as in Rockefeller's time, is to make the monopolist  
choose: Windows or wagons? Gates has already said he wants to keep  the 
road; he wants no deal that deprives him of Windows. Very well;  then 
make him sell off his wagons, his Word and Office programs, and  fairly 
share the Windows specs that competing programmers need to run  their 
wagons on his road. 

And then, dear federal trustbusters, please take a look at my cable-TV 
bills.