TCS Daily


Here's the Bill

By Sonia Arrison - March 28, 2002 12:00 AM

Last year, the Department of Justice (DOJ) and Microsoft signed an antitrust settlement, now under review by federal Judge Colleen Kollar-Kotelly. Nine states, led by California Attorney General Bill Lockyer, rejected the agreement and proposed alternative penalties that would benefit a few firms, but ironically would harm consumers and the economy.

A key element of Lockyer's plan is the removal of middleware code -- such as a browser or media player -- from the Windows operating system. The purpose of this demand is to allow Original Equipment Manufacturers (OEM), such as Gateway or Dell, to sell computers without Microsoft middleware products.

Technically, it's questionable whether the middleware code can be completely removed, so Microsoft and the DOJ agreed that Microsoft would create a better add/remove function, allowing rival products to be installed and rendering Microsoft's products invisible to the end user. Although this would seem to satisfy the AG's goals, the nine states are still pursuing the tougher standard.

Some may find this stubbornness frustrating, but if the demands were met, the costs to software producers and consumers would be enormous. University of Texas economics professor Stan Liebowitz recently analyzed some of the costs associated with the Lockyer plan and found that it would cost PC software producers at least $30 billion over the next three years. A burden of that magnitude is not exactly what struggling technology firms need right now.

The costs, Liebowitz writes, are "due to software developers having to adapt their software to new middleware they might not prefer because there is no safety net middleware they can always count on being available to all Windows computer users."

Basically, the state AGs propose to poke holes in the Microsoft platform with the expectation that software producers will pay to fill those holes. But that's not what Microsoft predicts would happen.

Microsoft attorney Dan Webb recently told the court that the proposal for a stripped-down version of Windows without Internet Explorer and other middleware is technically impracticable and would be a "death sentence" for Windows -- just what its competitors would like to see happen. Not only are the costs of the Lockyer proposal high, but they also disproportionately harm his own constituents.

According to the report, California software developers and residents would pay an extra $11.1 billion dollars over the next three years. That's in addition to the tax dollars Californians are already paying for the attorney general to use the law for the benefit of a few firms. And make no mistake, this case is driven by a few well-heeled companies that want to see Microsoft's demise: Sun Microsystems, Oracle Corporation, and AOL Time Warner.

It's no accident that Attorney General Lockyer also wants to force Microsoft to distribute Java, a platform developed by Sun Microsystems, free with every copy of Windows for the next 10 years, even though consumers have shown little interest in it. A politically motivated request, but not quite as egregious as the demand that Microsoft disclose the source code for Internet Explorer. That would essentially take Microsoft's hard earned intellectual property and give it away -- a suggestion as wrong now as it was before the trial started.

AOL Time Warner is the obvious beneficiary of the proposed government theft of Microsoft's intellectual property. It owns Netscape, a browser that competes with Internet Explorer but which has been languishing in the marketplace.

If Lockyer and his fellow attorneys general succeed in instituting the wishes of Sun, Oracle, and Virginia-based AOL Time Warner, they risk harming a large number of people they are supposed to protect. When software producers have to spend more to make the same product, consumers will be hurt because they'll be forced to pay higher prices for less choice - there's no doubt that higher production costs would push smaller producers out of business.

There have always been a number of principled reasons that the Microsoft case should never have begun, but now there are a whole host of practical reasons why it should end soon. Substituting politics for market innovation is a bad idea whose time has passed. In addition, Sun and AOL Time Warner have recently begun their own antitrust cases against Microsoft.

Consumers and software producers should not be forced to pay for vendettas in which they have no interest. It's time for California Attorney General Bill Lockyer and his colleagues to back off and let those who will gain from the destruction of Microsoft to pursue it with their own funds.

Sonia Arrison is director of the Center for Technology Studies at the California-based Pacific Research Institute. She can be reached at sarrison@pacificresearch.org.
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