Re: Nader/Love: Remedies article in Legal Times

["Lewis A. Mettler" <lmettler@lamlaw.com>]

James,

A consumers perspective is indeed welcome on this list.  A few key
comments have been inserted in context.

James Love wrote:
> 
> This is an article on remedies that Ralph Nader and James Love
> wrote for Legal Times.  It covers four topics, OEM licensing,
> breaking up Microsoft, Interoperability remedies (the longest
> and most value added section, with discussion of the 1984 IBM
> understaking as a model, and Richard Stallman's proposals
> regarding Interface information and patenting issues), and
> a requirement to port a divested MS Office to 2 new platforms.
> 
>   Jamie Love
> 
> Published in Legal Times on: Monday, December 13, 1999
> Web Published Tuesday, December 14, 1999
> 
> http://www.legaltimes.com/expcfm/display.cfm?id=2411&query=microsoft
> 
>             A Very Public Remedy
> 
> We need a much wider debate on potential
> outcomes in the first great antitrust case of
> the e-commerce age
> 
> By Ralph Nader and James Love
> 
> A public dialogue on potential remedies in the Microsoft
> antitrust case has been slow to develop. In part, that's
> because remedies have not yet been addressed in the
> litigation. But the judge's Dec. 5 findings of fact invite -
> indeed, demand - a much fuller discussion of what comes
> next.
> 
> And that discussion should not proceed solely within the narrow
> confines of the antitrust bar. We need a broader public
> debate to ensure that the interests of all Americans in greater
> competition, innovation, and consumer choice are recognized when
> the remedies are chosen.

This discussion should clearly include the consumers perspective and not
just those who promote any particular product whether it competes with
Microsoft products or not.

> 
> Everyone who expresses an opinion about the Microsoft
> case works from a set of basic beliefs about markets and
> technology. Here are ours:
> 
> Original equipment manufacturers are important. Many
> consumers do not feel comfortable installing or
> reconfiguring software or hardware. They're likely to use
> their PC in the condition in which it was bought. Therefore,
> the original equipment manufacturers (OEMs) play a crucial
> role in the distribution of software and computing devices.

This is very true.  OEMs should have complete freedom in designing and
packaging systems they feel will have consumer appeal.  Specifically, if
an OEM wants to offer Windows with Lantastic as the networking
technology, then that OEM should be able to do so without financial
penalties from being forced to also pay for the Microsoft brand of that
technology.  The separation of products at the OEM should be liberally
applied.  If any OEM combines products that result in a poor product
that is their risk and their risk alone.  Might they need to offer
support?  Yes.  And, the OEMs are the appropriate parties to offer that
support.  If a consumer is going to use products from more than one
vendor a common source of support is essential.  If any one OEM does not
wish to offer such products and support, then that is their call.

> 
> With the exception of Apple (and maybe even Apple), all
> major PC OEMs license software from Microsoft. This gives
> Microsoft the power to discipline "uncooperative" OEMs by
> charging higher prices and by discriminating in areas such as
> technical support. Not surprisingly, Microsoft rivals often
> find it difficult to distribute their software through the OEM
> channel.

If OEMs are not given multiple sources for their products (including
Windows and Office, etc.) then regulation will be required.

> 
> Internet navigation is important. Since the time and
> attention of computer users is scarce, companies can
> profitably use control of the "first screen," or default
> choices, of an Internet browser to promote e-commerce
> sites. If a single firm exercises too much control over
> Internet browsers, competition in e-commerce markets will
> suffer.

The internet has already suffered at the hand of Microsoft.  R&D moneys
for Netscape or any other company are non-existent while Microsoft
forces the sale of IE (piling up their R&D moneys) at an undisclosed
price.  This is untenable.

> 
> Interoperability is important. The usefulness of software
> programs often depends on their ability to work with other
> software programs. As indicated by the record in the trial
> and extensive documentation elsewhere, Microsoft has used
> interoperability as a weapon against its competitors.

And Microsoft management will always continue to do so.

> 
> Applications are important. People buy PCs to run
> applications, and these applications have to work with other
> applications. Happily for those who place themselves entirely
> in the hands of Microsoft, files can be easily shuffled
> between the dominant Windows applications and the
> company's Microsoft Office applications. Indeed, Microsoft
> Office is as much a source of monopoly power as is
> Windows. They present many of the same issues - OEM
> licensing, bundling, product integration, access to
> programming interfaces, etc.

Microsoft (Office) products right now are designed to require other
Microsoft products and frustrate the consumers ability to benefit from
other possibly superior technology.  Independent developers everywhere
are frozen out of key future markets by this process.

> 
> Remedies should be forward looking. They should look at
> problems that will be faced tomorrow, not yesterday. There
> has been much criticism that the Justice Department's
> earlier antitrust cases against Microsoft focused on battles
> that the company had already won and offered little to
> address new technologies.
> 
> Microsoft can't be trusted. The past six years have
> demonstrated that Microsoft cannot be trusted, and one
> should not predict that Microsoft will carry out any
> settlement in good faith. The company's conduct during the
> trial itself was the best evidence. When the judge ordered
> Microsoft to offer OEMs a version of Windows that did not
> include the company's Internet Explorer browser, Microsoft
> served up an outdated 1995 version of Windows that
> wouldn't even work with modern PC hardware. If Microsoft
> was willing to insult a federal judge in the middle of an
> antitrust proceeding, it's likely to be pretty bold after it
> enters into a consent degree.

It is very clear that any agreement that Microsoft makes will be ignored
completely and the lawyers instructed to defend that refusal to obey in
court.  This is a clear and obvious business policy.

> 
> So what's the solution? How can we break Microsoft's lock
> on the market in ways that will encourage a competitive,
> innovative future for the computer industry?
> 
> Here are four remedies that the Justice Department, the
> court, and the rest of us should consider.
> 
> Reforming OEM licensing. There are more than 300
> references to OEMs in the court's findings of fact and lots of
> details about Microsoft bullying. Nondiscriminatory
> licensing of Windows to OEMs would go a long way toward
> helping those companies stand up to Microsoft. At least,
> OEMs should be able to say no to Microsoft's pressures to
> eschew its rivals' products.

Making sure that OEM's have multiple sources for essentially the same
product goes a long way to assuring this.

If only one company (particularly Microsoft) is able to offer the
products then they must be highly regulated.

> 
> There may be enough in the trial record to justify changes in
> Microsoft Office licensing, as well. This would be useful,
> particularly since Microsoft continues to eliminate
> competitive office productivity tools and is turning Office
> applications into Internet authoring tools that embed
> proprietary technologies into a new generation of Web
> documents.

Microsoft Office and Networking technology need to both be looked at
very seriously.  Both technologies enhance the power of the monopoly.

Microsoft Office (even though it remains available on the Mac for now)
greatly limits the ability of any OS to enter the marketplace and all
but prevents any office product competitor from entering the market
unless they do so on another non consumer OS.  WordPerfect has taken
this route as well as Star(Sun).  But, competing fairing and opening on
the Windows platform is against Microsoft Corporate policy.

Microsoft Networking technology bundled with the OS also prevents most
consumers from considering non-Microsoft platforms because of the
extreme difficulty in adding non-Microsoft systems to a network. 
Bundling networking technology with the OS only forces all consumers to
buy all systems of one brand.  A dominant or monopoly will always hold
off superior technology simply by first forcing all consumers to buy the
branded product before the customer can shop for competing technology
they may want and need.


> 
> Breaking up Microsoft. In many respects, this is the
> obvious option because Microsoft itself has made it clear
> that it will resist change without strong economic incentives.
> Separating the operating system and the applications into
> different companies would remove Microsoft's incentive to
> make alternative products crash.

Both Office and Networking technology should be divested together with
the requirement to support at least 3 different platforms or divested
multiple times non exclusively (6 or 8) so that a number of independent
companies can pursue the support on other platforms.

> 
> Ideally, the court would go further. Microsoft has anticipated
> an adverse ruling on bundling Internet Explorer by seeking
> to make the program an integrated part of Microsoft Office
> and other applications. If Internet Explorer itself were a
> separate divestiture, the entire browser market might
> become competitive again. The owner of Office would find a
> way to make his program function with more than one
> browser.

Both the internet technologies and networking technologies are a
multibillion dollar marketplace that should have its own open, fair and
competitive markets.  No internet or networking technologies should be
bundled with operating systems, other middleware or applications
exclusively.  Bundling across product types only restricts competition,
removes choices from consumers and limits the business ventures that
independent software developers can pursue.

At this stage in the development of the internet, the absolute worst
thing that can be done is limiting the business ventures that software
developers everywhere can pursue.  Microsoft's policy is to do to
everyone else what they did with Netscape if they can possibly do so. 
Any laws be damned in the process.

> 
> Fixing interoperability problems. As indicated by the
> record in the trial and extensive documentation elsewhere,
> Microsoft has used compatibility and interoperability as
> weapons against its competitors. Some have proposed
> opening up the Windows source code. While we think it
> useful to require such disclosures, they aren't enough.

Selling the windows source code to 6 or 8 players non exclusively may
have the same affect.  Furthermore, a "Windows" standards body could be
required to publish either their code or their specifications.  You
could also require something similar to what Sun is doing with Java. 
The technology is freely available with royalties paid for commercial
utilization of that technology.

> 
> A much better framework for dealing with interoperability
> concerns comes from Europe. In the early 1980s, the Reagan
> administration dismissed the government's long-standing
> antitrust case against the IBM Corp, but the European
> Commission's antitrust authorities did not quit. In 1984,
> they reached a settlement with IBM over a long history of
> complaints that echo today's concerns about Microsoft.
> 
> In December 1980, the EC had found IBM to be a dominant
> supplier and accused it of abusing that position by failing to
> supply its competitors "in sufficient time" with technical
> information needed to create products that would work with
> IBM's mainframe computers. The EC also complained about
> hardware and software bundling and about various refusals
> to supply services to customers who used non-IBM
> hardware. There were extensive hearings and negotiations
> about remedies, including discussions with an advisory
> committee of national experts.

Both the Data General and AT&T (Bell labs and Unix) cases also provide
some insight as to possible solutions.

> 
> After tough bargaining, IBM agreed to a sweeping remedy to
> ensure competitors' access to mainframe interface
> information. The so-called IBM Undertaking covered the
> company's System/370 computers, the dominant platform
> for mainframe computers. It began in Aug. 1, 1984, and it
> worked like this:
> 
> IBM agreed to provide interface information to competitors
> by specific benchmark dates, such as "as soon . . . as such
> interfaces had become reasonably stable." That information
> would be provided either through established documentation
> and related materials (such as source code) or through some
> other adequate means, including newly prepared documents
> containing only the interface information.
> 
> IBM acknowledged the "widespread interest in
> interconnecting systems and networks of different
> manufacturers," and agreed to publish extensive information
> to facilitate the attachment of competitors' systems or
> networks to IBM networks.
> 
> Any company that was doing business in the EC and
> developing relevant products, including U.S. and Japanese
> companies, could ask IBM for such interface information.
> And IBM would charge only reasonable and
> nondiscriminatory fees for the information.
> 
> IBM was required to support international standards for
> interconnection - including "open system" interconnection
> - for the products, systems, and networks of rival
> manufacturers.
> 
> In addition to signing the Undertaking, IBM agreed to a
> system of oversight that required the company (1) to meet
> with EC authorities every year to "take stock of the
> implementation of the Undertaking and its effects," and (2)
> to present the EC with an annual report describing in detail
> "IBM's response to each question or request received under
> the terms of the Undertaking." IBM would also discuss the
> outcome of these cases with EC antitrust authorities.
> 
> After five years, the company could have ended this
> arrangement. But IBM seemed to recognize that the EC
> process had created a new level of comfort for companies
> that made third-party products for the IBM mainframe
> platform and, in the eyes of some observers at least, helped
> protect IBM from itself. Thus, IBM voluntarily permitted
> the agreement to run for 11 years - six more than the
> minimum requirement.

If Microsoft does not develop a similar attitude its breakup will be
necessary.

The Microsoft problem is a management problem as much as a technological
one.

> 
> The EC reported that by July 1995, IBM had received 262
> requests from 24 competitors and addressed 2,001 individual
> questions. In the 11th year alone, there were 50 requests and
> 436 individual questions.
> 
> The IBM Undertaking sets a benchmark for evaluating the
> remedies currently proposed in the Microsoft case. It also
> provides a model of ongoing oversight that few so far have
> been willing to apply to Microsoft, but that may be needed to
> ensure that Microsoft follows through on its commitments.
> 
> Another means of ensuring that Microsoft discloses
> information in a nondiscriminatory way has been suggested
> by Richard Stallman, founder of the modern free-software
> movement. Why not bar Microsoft from requiring
> nondisclosure by other companies as a condition of receiving
> interface information? Stallman's rule is: "If they cannot
> publish the interface, they cannot release an implementation
> of it."

Or, you could just require that no products can be sold until 6 months
after key information is released publicly.

However, this process still limits the advance of technology to only one
company.  Selling the technology outright non exclusively is more likely
to result in a more rapid advance of technology.

All the smart engineers do not work for Microsoft.  Most or many of them
refuse to work for Microsoft.  So, there is no reason to require the
industry to follow Microsoft (or any company for that matter).  Java was
not stolen from Microsoft.  Navigator was not either.

The advancement of technology would call for the break-up of Microsoft
just so superior technology can in fact succeed.

> 
> The most recent twists on interoperability remedies
> highlight concerns of the free-software movement. By "free
> software," we mean the type of software, like Linux or
> FreeBSD, that is largely developed by volunteers. Stallman
> and others are rightly worried that Microsoft will seek to use
> software patents to cripple the free-software movement - a
> strategy mentioned in internal Microsoft documents.
> Therefore, Stallman also suggests that Microsoft only be
> allowed to use its patents defensively, possibly through a
> mutual-defense pooling agreement. Microsoft patents would
> be cross-licensed to other companies and individuals who
> agreed to join the mutual-defense pool.

Regulating one company and not others simply to restrict its ability to
do business is fraught with problems.  The FTC is not equipped to do
it.  Neither is the court.  However, if you do not solve the problem
then regulation of the Microsoft management will be required.

Keep in mind that any regulation is the regulation of the management of
the company not the products themselves.

> 
> Porting Office to new platforms. Finally, once the court
> separates Microsoft Office from Windows, it should require
> the owner of Office to port the entire platform to at least two
> additional operating systems. For five years, the owner would
> be required to release simultaneous updates to the four
> supported platforms (Apple, Windows, and the two new
> ones). This would be expensive but hardly unreasonable
> since Office generates billions of dollars a year with huge
> profit margins.

Office and networking technology could easily be sold non exclusively to
6 or 8 players in the industry or sold to one company which in turn must
be highly regulated.  If we want a "PUC" of the software industry, keep
the company and products intact.

Separating the products does not harm the products.  It removes the
corrupt management.  Management that is all too willing to ignore any
and all laws that limit their power to preclude others from key markets
and force the sale of one brand of key products.

Corrupt management that supports hacking (of AOL services) and
encourages hackers all over the internet to just try and take what they
are refused needs to be removed from power.  Do you really think that
AT&T would have tried hacking into AOL without being pushed by
Microsoft?  Was AT&T pushed by Bill Gates to also try hacking into AOL? 
Microsoft does own a part of AT&T.  Could AT&T and Tribal Voice simply
be pawns doing Microsoft's bidding?  Did Netscape (AOL) give Microsoft a
cease and desist order regarding that hacking attempt?

The products are not the problem.  Removal of power from the management
(by whatever means) will be required.

> 
> The extension of Office to more operating systems may also
> be necessary to generate real competition in the operating
> systems market. Right now, Windows is perhaps the
> fourth-best operating system for people who use a PC for
> everyday tasks such as word processing or browsing the Web.
> BeOS and Linux are potentially important alternatives, and
> Gateway is also working on a new operating system. But
> Windows will not likely face much competition in the PC
> market until popular applications can run on the new
> operating systems.

Applications such as Office do need to be either required to be
available on alternative platforms or split up in such a way that
porting to other systems is highly likely.  Selling a copy of Office to
Corel will most likely put those applications on Linux as well as OS/2
and BeOS.

Networking technology must also be separated from the OS.  Bundling that
technology only limits the ability of superior operating system
technology from competing within any particular customer.  All consumers
need solutions permitting them to benefit from the relative advantages
of all platforms and should be limited to an all Microsoft or all Linux
or all OS/2 solution.  Even BeOS will benefit.  And, most importantly
any future OS technology will likewise benefit.  Unbundling networking
technology greatly reduces the barriers to entry for the OS marketplace.

> 
> Ultimately, the purpose of debating Microsoft remedies is to
> address not only the immediate problem, but also the next
> generation of competitive challenges in the new information
> technologies. The remedies for anti-competitive conduct
> that may be ordered by the court here will have enormous
> impact on consumers, the Internet, and the computer
> industry. Indeed, we would not be exaggerating if we said that
> the Microsoft case could be instrumental in defining the
> nature of competition in electronic commerce in the coming
> century.

There is no doubt about this.

And, key to any possible remedy must focus upon offering appropriate
choices to consumers and fair, open market opportunities for all
software developers not just one company (with an ethics problem).

> 
> Ralph Nader is a consumer advocate, and James Love is a
> director of the Consumer Project on Technology.
> 
> Web Published Tuesday, December 14, 1999
> Published in Legal Times on: Monday, December 13, 1999
> 
> --
> --
> James Love / Director, Consumer Project on Technology
> http://www.cptech.org / love@cptech.org
> P.O. Box 19367, Washington, DC 20036
> voice 202.387.8030 / fax 202.234.5176

-- 
Lewis A. Mettler, Esq.(Attorney and Software Developer)
lmettler@LAMLaw.com
http://www.lamlaw.com/ (detailed review of the Microsoft antitrust
trial)