Re: Alternative MS solutions - comments on observations by Mr. Reese

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

Robert Reese wrote:
> 
> It seems that we are all looking at different pieces of the MS puzzle.  Mr.
> Dahlgren is looking at the telecommunications and hardware side, Mr. Mettler
> is looking at the software vendor and developer industry, and I'm looking at
> consumer interests.  Perhaps my definition of "essential facility" is
> incorrect.  If any of the above is incorrect, please post a correction.
> Same applies to my definition of "Essential Facility".
> 
> If my definition of "Essential Facility" is correct, it means that everyone
> has the right to obtain the "Essential Facility".  For example, power
> companies must provide power for a *reasonable* price to anyone within their
> area.  Granted, I've no idea behind everything that power companies can and
> cannot do.  I cannot choose whom provides my power, but because electrical
> power is considered an essential facility, it is accessible to me for nearly
> a not-for-profit fee.  However, the operating system on a PC is like a
> powerplant.  If the operating system is considered an essential facility,
> Microsoft can only charge a very slight fee for it.  This would force the
> opening of the OS source code and programming interfaces (APIs).  No one
> would have a competitive advantage if equal access to the OS is standard.
> Better yet, force all "essential facility" operating systems to be released
> for free, or, at most, for cost plus a reasonable margin like the power
> companies have to do.

I think the observation to be made is everyone can always get access to
essential facilities when provided by a monopolist.  The only question
is who sets the price and terms.  If anyone insists upon using any
facility owned by someone else without them setting the price and terms,
it takes both a monopoly and government regulation.

My preference is to solve the problem not regulate it.  And, I might add
that the court system is the least capable system we have to regulate
anything.

The problem with opening up the source code and APIs is simply that it
does little or nothing to solve the basic problem of the monopoly.  For
companies that want to write software for the windows platform, such a
move might help them.  But, that effort helps Linux, OS/2, BeOS and
Apple very little in their effort to compete with the OS monopoly.

Personally, I have absolutely no interest in access to any Microsoft
technology.  But, I insist upon a fair and competitive marketplace for
all operating systems and applications.  Opening up the source code for
Windows does not help BeOS compete in the OS marketplace.


> 
> Java would have made an excellent operating system, by the way.  Any
> application would run on any machine containing a virtual machine for the
> app's platform.  This is probably what truly scared Microsoft.  Software
> vendors could make java-native programs, bypassing the MS operating system
> altogether, or convert existing MSOS-based applications run on Java.
> Unfortunately, between Sun and MS, this opportunity has been destroyed.
> Java is still around, but is mortally wounded.

An operating system just runs programs.  The fallacy is that the OS must
also provide all APIs used by applications.  That is not a primary
function of an OS at all.  GUIs can do that.  Runtime systems such as
Java can do that via Virtual Machines.  Even browsers can do that.  This
is the threat that Microsoft perceived when they set out to ruin both
the Netscape and Sun products.  Microsoft only wants applications to be
dependent upon their operating system and only wants their own company
to write them all. (Any monopolist would want that.)

Java is not dead.  Java is not the last of its kind either.  When you
see the number of applications that simply run in browsers regardless of
the system being used, you realize that the day when all applications
must be written for a specific OS is past.  At least it will past if
Microsoft is prevented from flagrant violations of antitrust and unfair
competition laws. 

Personally, I think that if the monopoly power of Microsoft is
eliminated you will see a 10 fold increase in new applications,
operating systems and run-time environments.  The question is whether
you really want superior technology to have an fair opportunity or
whether you just one company to dictate to the industry what technology
it must use.

> 
> I can understand Rick Dahlgren's position as it relates to the
> telecommunications industry.  Interestingly, AT&T and AOL pose greater
> threats to him than does Microsoft, but it does help to get unusual insights
> such as Rick's in these discussions.  He has brough up a lot of stuff I have
> not seen anywhere or thought of.  Unfortunately, I find Mr. Mettler's
> suggestion to basically shatter Microsoft into dozens of insignificant parts
> a bit much.  

Do you want to solve the problem or not?  Breaking up Microsoft along
product lines and multiple times within key lines such as the OS does
not harm the products nor consumers.  If those products are any good at
all, then having real price competition for those products can only
benefit the consumer. Forcing all consumers to reimburse Microsoft
Corporation half a billion for R&D on IE (plus a tidy profit) directly
harms all consumers today in the pocketbook.  I have estimated that up
to 70% of the retail cost to consumers for Windows 98 is directly
attributable to IE.  Bit high, you say?  Perhaps.  But, what else did
Microsoft research and develop that showed up in Windows 98 anyway?  IE
ran half a billion in R&D. And, it was a guaranteed forced sale to
hundreds of millions of customers.  A monkey could make that investment
decision.

Take any Microsoft product you want.  Isolate it completely.  Now, look
out into the marketplace and see if you can find a company which
competes with that product as perhaps their only product or their main
product.  You may find several, right?  Separate out Microsoft
Networking.  You find Novell, Lantasitic, Banyan and others.  If the
court were to force Microsoft Networking to be a separate product not
connected in anyway with any OS or other product, I would not consider
that to be unreasable.  That is the situation that competitors are in
right now.  So how could that be unfair or unreasonable?

No company has a right to own a monopoly.  At times a monopoly or
franchise may have some merit.  Building the railroads in this country
is a good example.  Perhaps building the original phone network is
another.  But, those are examples where major capital requirements are
necesssary and future protected markets may be required.

The computer software industry has no such requirements whatsoever. 
Linux proves that today.


> His suggestion for splitting Microsoft vertically and
> horizontally IS valid though; the computer industry is itself both a
> vertical and horizontal industry, making it fairly unique.  In fact, I
> cannot think of any other industry so widely dispersed.  Mr. Mettler's
> proposition does not take into account the one really good thing Microsoft
> has done for the industry, which is finally force the individual vendors to
> standardize around a platform, albeit a proprietary one.  

Well.  Not really.  Unix is not part of that standard.  Neither is
Apple.  Neither is Linux.  Neither is AS/400.  Neither is HP 3000 MPE.

Is there a benefit in having a single standard?  Perhaps.  But, we do
not even have it now.

What would really benefit consumers is not an OS standard at all.  What
would benefit consumers is a middleware standard or better yet multiple
middlewear standards.  More than one Java, in other words.  We need a
JVM for all operating systems.  And, we need a browser platform for all
operating systems.  We absolutely do not need only one operating
system.   There are very good reasons why we have many different
operating systems.  And, there are many reasons why we should have
applications that can operate identically on all systems regardless of
the operating system.  Middleware has to solve the problem.  Java and
browsers offered to do that.  And, as is obvious, Microsoft
intentionally violated antitrust law in their effort to prevent
middleware solutions from gaining acceptance.  This was done by
attempting to fragment (sabotage) Java and dry upon any revenue base for
browsers.

> I, too, remember
> the days when it was virtually every company for itself.  One of the reasons
> DOS was so limiting was because it could only handle one application at a
> time.  Imagine what it would be like if each software vendor forced you to
> use only their version of an operating system to use their product.  That is
> one nightmare that might actually occur if Mr. Mettler's ideas are carried
> through.

False.  In fact, your nightmare could not happen if Microsoft is split
as I have suggested.  6 or 8 companies would offer an operating system
persuant to a common standard.  Those companies (HP, IBM, Dell, Compaq,
Novell, etc.) do not even have a range of applications they could force
upon their customers.  Look at the Unix marketplace.  Most Unix
applications are not written by the Unix vendors at all.  Some are. 
But, the majority are clearly not.

If applications are separated from the OS vendor, those applications
would more likely than not be offered either for multiple platforms or
be written using standards that run on multiple platforms.  This is
precisely the opposite of what is suggested here.

> 
> If the software industry is going to be interfered with, the best way is to
> do it using the contracts the industry is based on, not the software.  The
> only way Microsoft has maintained its hold is through contracts and
> licenses.  This is the easiest and most effective way of handling Microsoft,
> and also of handling punitive damages.  Limit what can be in the contractual
> agreements, and how they can be enforced.

Contracts are worthless.  If one company has a monopoly or a dominant
position in a market, then maybe a contract can help keep competitors at
bay.  But, removing the contract does little or nothing.  The reason is
very simple.  No contract is worth anything unless the company wishing
to enforce the terms has the necessary legal power (read this as a big
legal budget) to force an economic result that would not otherwise
occur.

For example:  Cancel all Microsoft contracts today.  Void them all. 
What changes?  Nothing, right?  Compaq still picks Windows.  HP still
picks NT.  Agreements and understandings do not need to be in writing
anyway.  Microsoft can simply draft a public wholesale price list that
will prevent any meaningful competition in the OS market for many years
to come.  Nobody even needs to sign it.  It is a monopoly, remember.  A
monopoly simply means that the holder thereof sets all terms and prices
or no business is conducted.  Written contracts just do not matter.

This is why the "conduct" type of remedies are worthless in this case. 
With monopoly power, you can be a nice guy and still win all the
business.  If a company like Netscape comes along, the monopolist just
makes that product a bundled feature of the monopoly product and that
competitor is out of business just like Netscape.

> 
> Perhaps banning software licensing completely is the way to go.  Outright
> ownership of the application (but not the code) is best for the consumer
> anyway.  

Personally, I do not see any difference here for the consumer.

> Copyright protection is designed to prevent illegal copying and
> distribution already, so why do we need a license?  Declaring the bad ones
> void, cutting out the violating clauses from contracts, and gutting the
> EULAs will cobble Microsoft as well as any other software company gaining an
> anti-competitive foothold.  I'll bet forcing Microsoft to fulfill its
> contractual agreement to refund unused operating systems would be an
> eye-opener for them as well!

Well.  I would be glad to force all citizens of this county to pay me
for 1 hour of legal time.  Anyone wishing a rebate can make an
application for a mail in rebate.  But, the initial charge goes right on
your credit card each time you buy a car, rent an apartment, buy a home
or sign any contract.

> 
> Shattering Microsoft is not going to help.  It will leave a number of voids
> in the industry, all of which will be filled promptly by another company
> intent on locking their portion of the industry.  

The only void would be the absence of monopoly power.  The products are
not thrown away.  The standard consumer OS would not even be discarded.  

> If the contractual and
> licensing aspect is done correctly, this will inhibit any long-term problems
> as well by preventing non-competitive agreements to be made at all.

If you really want to regulate the computer software industry more
tightly than any other we have, I suppose you could do that.  But, the
courts are not capable of doing that.  There would have to be a new
commission, the CTC (Computer Trade Commission) to approve and regulate
all computer software contracts.

I, for one, do not want a "regulated" industry.  I do want a fair and
competitive one.


> 
> Robert Reese~
> robert.reese@mindspring.com
> rwr@mindspring.com
> ==================================================================
> 
> ---------------
> >>
> BELOW: Mr. Mettler wrote, in a posting titled: Experts did not Grapple With
> all options
> >>
> 
> Unfortunately I missed the conference on April 30th.  And clearly in one
> day not all solutions can be fully evaluated.
> 
> However, I find little mention of splitting Microsoft both horizontally
> and vertically at the same time.
> 
> First, split up Microsoft allow all product lines (including Word and
> Excel for a starting point).
> 
> Then take the major products like the Windows 95/98 and NT and slit them
> again 6 or 8 times.  Now take these 30 units or so and either set up new
> companies with existing shareholders getting the new shares or sell them
> outright to existing companies in the marketplace.
> 
> What would happen?  Would HP, IBM, Novel, Caldera, Corel, Symantec,
> Dell, Compaq and others bid for a "non-exclusive" but outright ownership
> of the Windows code base?  NT?  Windows98?  You can ask them.  But, my
> guess is that 6 or 8 buyers could easily be found.  Same with Word.
> Same with Excel.
> 
> But what about fragmentation of the technology?  Well.  If one of these
> companies wanted to be incompatible with the "standard" version, good
> luck to them, right?  But, HP, IBM and Compaq would go with the
> standard.
> 
> Lately Microsoft has expressed strong views on ISO standards.  Well.
> Let the companies who buy a "copy" (not license..."buy"), form their own
> standards organization to assume that applications written to the
> standard will run on all standard versions.  A real advantage of this
> approach would be the unlikely hood that any application would be
> bundled with the OS by all vendors.   So the browser remains an
> application with any company having a fair shot at that market if they
> develop superior technology or ideas (...this is very important).
> 
> Call this the "grid split" if you must.  The use of the terms "vertical"
> and "horizontal" are not being commonly applied because of the choice
> between applying those terms either before or after the split.
> 
> If you want to solve the monopoly problem, a simple solution is
> available.  Applying a "grid split" puts old Microsoft products in no
> more disadvantage than all other products now have in the computer
> industry.  And, compared to Standard Oil and AT&T, there is no
> infrastructure that needs to be worried about.  There is no property to
> be concerned about.  It is all on one big floppy somewhere.  And, all
> employees are highly mobile and most likely looking for superior
> opportunities.
> 
> A computer software company is the easiest to split up.  It can be done
> in short order.  (Of course it would put a lot of accountants and
> lawyers to work for awhile.)
> 
> Which Microsoft products would fall flat on their face if they had to
> compete straight up?  Which products could be sold non exclusively
> multiple times yet retain a standard use attractive to consumers?
> 
> Look at Microsoft the same way you would any company about to be split
> up.  Why is it necessary that Microsoft retain an unfair advantage over
> the thousands of other software companies?  Why is it necessary that
> Microsoft decide all technical issues and standards?  (We do have other
> standards bodies and can easily form more. They work too.  And, when
> they work, competition is fair.)
> 
> This monopoly problem does have a solution.  And, anyone that suggests a
> solution may have more problems than what we have now, is most likely
> protecting their tuff.  What we have now is the total absence of
> competition in some very key markets.  What we have now is one company
> telling everyone which products and technologies they must purchase.
> What we have now is an industry so sick that many highly qualified
> people work for free simply because the paying job they really want does
> not exist.
> 
> --
> Lewis A. Mettler, Esq.(Attorney and Software Developer)
> lmettler@LAMLaw.com
> http://www.lamlaw.com/ (web site reviews Microsoft antitrust transcripts
> daily)

-- 
Lewis A. Mettler, Esq.(Attorney and Software Developer)
lmettler@LAMLaw.com
http://www.lamlaw.com/ (web site reviews Microsoft antitrust transcripts
daily)