ISSUE 419: THE HIGH-TECH OFFICE--Alan
Government challenge to Microsoft's methods
makes the company look like a giant bully - Nov 4 1997
By now, you've probably heard how the U.S.
Justice Department has taken Microsoft to court,
requesting that the judge impose fines of $1.4 million a day against
the software giant. As I write this, the government has made its case
and garnered most of the publicity. Microsoft has 11 days to respond to
the charges, and should have responded by the time you read this -- at
least beyond Microsoft vice-president Steve Ballmer's comment,
"To heck with Janet Reno."
The government claims that Microsoft violated a 1995
agreement to set limits on what the company could do in making its
operating systems available to hardware manufacturers. At that time,
the government asserted that Microsoft was taking advantage of its
near-monopoly on operating systems to push sales of its applications
such as Office. (You can read the original consent decree on the Web at
At issue this time around is Microsoft's Internet
Explorer Web browser. With this product, Microsoft has been forced to
come from behind in a bid to win users over from Netscape's
Navigator. The retail release of Windows 95 doesn't include any version
of IE, but Microsoft has been including its browser in the versions of
the operating system sold to the so-called OEM (Original Equipment
Manufacturer) market, for pre-installation on new hardware.
Even though IE still isn't included in the retail Win
95 package, Microsoft asserts that it is part of the core operating
system. Even early versions of IE worked by adding the bulk of its
computer code to the core of Windows; as a result, several other
software companies have built help and tutorial systems around the IE
core. The newest version of Internet Explorer, IE 4, goes so far as to
offer to replace standard operating system functions (such as
double-clicking on icons) with more Web-like alternatives, in effect
making the whole operating system act like a Web browser. This
integration of browser and operating system is expected to be even more
complete in next year's Windows 98.
While the competition, Netscape Navigator,
acts more like a traditional application, Netscape too has discussed a
future where operating systems play less and less of a role, where it
won't matter whether users are working on a Windows PC, a Mac or a Unix
workstation, because Netscape Navigator will be the main way they
interact with their computer.
Browsers and operating systems may merge in the
future, but that's not really the case right now. And while the justice
department isn't questioning Microsoft's right to give its browser away
while Netscape offers its own for sale, it is questioning the way IE is
programmed to act as if it owns the "desktop." Like many other software
products, IE puts an icon onscreen. Unlike most other icons, this one
(which claims to be "The Internet") can't simply be dragged to the
Recycle Bin. It can be removed, but not in any direct or obvious ways.
And despite the 1995 agreement, evidence from a number
of OEMs suggests that Microsoft put pressure on them to ensure that
they included Internet Explorer rather than Netscape Navigator with
their hardware. Compaq, for example, testified that when they
wanted to pre-install Navigator rather than IE, Microsoft threatened to
cancel their licence to bundle Windows 95 with their computer systems.
By insisting that Internet Explorer is an operating
system extension, Microsoft is able to claim it is not in violation of
the 1995 pact. Microsoft legal vice-president William Neukom suggests
that just as Win 95's Explorer lets users access files on their own
hard drive or across a local area network, Internet Explorer simply
extends that basic capability across the Internet.
"Microsoft has always included ways in its operating
system to locate information from different sources," he said.
Despite Neukom's opinion, the government's allegations
are probably correct ... at least in the short term. Most users think
of Internet Explorer, like Netscape Navigator, as a product separate
from the operating system, as a product that they need to download or
purchase separately. As a result, the company's pressure tactics aimed
at forcing hardware manufacturers to include IE (and to display its
hard-to-remove icon on their products' desktops) would appear to be in
violation of the 1995 pact.
But nevertheless, this legal action will result in few
concrete changes. While its browser is not yet part of the key
operating system, by the next generation of software, this will be the
case. Whether required to or not, many OEMs will continue to bundle IE
with their systems. The program is, after all, available to them for
free. And despite all of Microsoft's efforts, Netscape Navigator still
holds 70 per cent of the browser market. While Microsoft, and
chip-maker Intel, have a near-monopoly in the PC industry,
consumers are well-served with increased power and features at
Ironically, by playing hardball in this area,
Microsoft has simply managed to play into the hands of the many who
regard it as a corporate bully -- a customer perception that may cost
it far more in the long run than the government's million-a-day fines.
And while, coincidentally, Microsoft was able to announce record
profits on the same day the government filed its charges, the effect of
being perceived as the Evil Empire will inevitably show up on
Microsoft's bottom line.*