Trouble in Redmond

Last Friday, after the close of the stock market, federal Judge Thomas Penfield Jackson released his preliminary findings in the government’s year-long anti-trust trial against Microsoft. He found that Microsoft used its monopoly in the computer-operating system market to thwart and stifle companies that dared to compete against it, thus “harming consumers in ways that are immediate and discernable.”

There is no question that Microsoft threatened to withhold licenses of its Windows operating system to computer makers such as IBM, Compaq and Gateway, as well as computer technology companies like Intel, Netscape and Real Networks unless these companies withdrew or changed products that threatened Microsoft. Worse, Microsoft has used a corporate practice of intimidation to attempt to destroy or squelch innovation in multiple markets in which it does business.

However, it is not at all clear that these practices have hurt the consumer. It can be argued that Microsoft made it possible for the consumer to gain access to the computer and all the software we use with it. It was Apple that would not allow software programmers and developers access to the programming code of its operating system when it was the dominant personal computer company in the early 1980s. Microsoft’s early version of Windows was an inferior product, but because it opened its code to programmers, thousands of useful and technologically innovative programs were written for the Windows operating system. From 1985 to 1995, non-Microsoft software prices decreased an average of 15 percent. During that same period, Microsoft software prices were reduced by 65 percent. Did those price reductions hurt consumers?

In many ways, the monopoly that Microsoft still enjoys is no longer as powerful as it was in the early 1990s. The Internet has opened uptechnological innovation in ways that Bill Gates never envisioned. America Online and Gateway will be marketing a computer without Windows that simply connects to the Internet. Linux is a relatively new computer operating system that, while still small, is growing its market share rapidly. Companies that make next-generation digital devices such as the hand-held Palm Pilot, are using operating systems other than Windows. MSN, Microsoft’s online network, has 2 million subscribers, while America Online has 20 million.

For an industry well-stocked with futurists, this situation defies prediction. The preliminary decision by Judge Jackson, if upheld in what certainly will be several rounds of appeals, might open the company up a devastating barrage of civil suits by numerous other companies, as well as a growing number of states. Unless the company capitulates and accepts what will likely be a very painful settlement — such as a forced breakup — from the Justice Department. Or unless a new presidential administration next year brings with it a tamer Justice Department. Or unless politically connected Microsoft convinces Washington to revamp what its friends in Congress already call “antiquated” anti-trust laws. Or unless…