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| MICROSOFT ON TRIAL | |
 November 12, 1998 
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ELIZABETH FARNSWORTH: Now, Phil Ponce has more. PHIL PONCE: Joining me are three veteran watchers of the computer industry. John McChesney is covering the trial for NPR, National Public Radio. Andrew Shapiro is director of the Washington-based Aspen Institute Internet Policy Project; and Paul Gillin is editor-in-chief of Computerworld, a weekly newspaper. Gentlemen, welcome. John, you've been in the courtroom every day. Give us some quick highlights that the government has put forth recently.
PHIL PONCE: Again, another example of the government alleging of Microsoft using its monopoly status - JOHN McCHESNEY: Using its muscle. PHIL PONCE: To put the muscle on Apple and that kind of thing. JOHN McCHESNEY: And in Apple's case the substitution of Internet Explorer for Netscape was again a threat from Microsoft, an alleged threat from Microsoft to not develop Office for the Macintosh, which Macintosh really needs in order to stay alive, and another allegation that, in fact, Microsoft sabotaged a multimedia application made by Apple called Quick Time. Microsoft, of course, denies all of this, and now we have this gentleman, Steven McGeety, from Intel. You heard Mr. Gates there say that this is a product of a bunch of disgruntled competitors, but the problem with Intel - I think this is why Microsoft has taken Mr. McGeety very seriously - is Intel really isn't a competitor with Microsoft. It's a partner with Microsoft in the development of the personal computer. And Microsoft writes its Windows operating system for that microprocessor, and Intel designs that microprocessor so it'll work smoothly with Windows. |
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JOHN McCHESNEY: Right. His status is somewhat ambiguous because Intel - he comes on his own. He's not - he's not forwarded to the trial by Intel. So we don't know quite what his status is. There is an Intel spokesman there, though, who keeps saying isn't our guy doing pretty well, so I think they're not totally neutral, as they say they are. The allegation he's making is that Microsoft suppressed a multimedia application, native signal processing is what they call it, that would run music and audio and video on the PC, and that Microsoft - Bill Gates became furious about this, saw it as a competitive product with Microsoft and told Intel that if it continued to market this product, that he would withdraw support for a new chip that Intel was making. That's an allegation. I'm not putting that forward as fact. PHIL PONCE: And how brutal was it in court today? JOHN McCHESNEY: It was very nasty because Microsoft went after Mr. McGeety's credentials, said that he was a lone wolf, didn't represent his company, had an ax to grind against Microsoft because his product, this multimedia product, was suppressed, taken off the market, that he was criticized by his boss for screwing up, that he had not made this product for Windows 95; he'd made it for the older version of Windows, so it wouldn't work. And he was moved out of his job by Intel and forward to MIT to a fellowship, and he blamed Bill Gates for that. PHIL PONCE: Andrew Shapiro, how much is all of this hurting Microsoft's image? |
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PHIL PONCE: Paul Gillin, Microsoft being hurt among those constituencies that Andrew Shapiro was just talking about? PAUL GILLIN, Computerworld: Microsoft's image may be hurt, but I don't think Microsoft's business is suffering as a result. In addition, this company is being accused of a fairly narrow offense in Washington, and that is using its browser technologies, operating system, to suppress a competitor, Netscape. It's a fairly narrow case, and it's one that I think the government has done a questionable job of proving at this point. The trial has taken quite a few other issues into account, but those really don't relate directly to what Microsoft is being accused of. PHIL PONCE: In addition to the possible impact on vendors, Mr. Gillin, how about the impact on consumers? PAUL GILLIN: I don't think that the impact on consumers is that great. Microsoft has never been accused of being a nice company. In fact, there is no precedent that consumers buy from a company because they think it's particularly nice. What consumers want and what people like corporate information technology executives want is products that they can rely on, products that are relatively stable and are backed up by stable companies, which they get good support for, and which offer reasonable value for the dollar. Now you can offer whether Microsoft does that - you can argue about that, but the fact in voting with their dollars, Microsoft's various constituents have proven that they think the company gives them a good value for the dollar. PHIL PONCE: Mr. Shapiro, I saw you shaking your head as Mr. Gillin was talking. ANDREW SHAPIRO: I would disagree with Paul on this one, and here's why. We've seen some developments in the last year that I think are really interesting. First, the industry - it seems to be really changing its mind. We have the growth of new coalitions of folks who say we need to establish benchmarks in the software and high-tech industry for ethics, for fair play, for what's competitive behavior, and what goes over the line, what's too aggressive when it comes to playing hard the way Microsoft does. Additionally, among a core constituency, which are those software developers and engineers, we're seeing a real interest in what's called open source technology, non-proprietary software that competes and really could take on Microsoft's dominance in the operating system market, encourage folks to check out some of that online at www.opensource.org. I mean, it's a really interesting debate about what our software should look like. And that's what's happening as a result of this trial. The last thing I would say is in terms of the average impact on consumers we have grassroots groups and Washington, DC-based groups like the Consumer Federation of America, who are saying there is going to be a long-term effect on the ability of consumers to choose from a robust and widely open marketplace unless something is done about Microsoft's monopoly. PHIL PONCE: Paul Gillin, less choice for consumers? |
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ANDREW SHAPIRO: But just last week Microsoft came out - there was a document that was leaked that showed that Microsoft sees Open Source as a threat and is trying to do the same thing to Open Source that it's done to Java, which is essentially nip it in the bud - PHIL PONCE: Java being another competing operating system. ANDREW SHAPIRO: Right. PHIL PONCE: The system that runs a computer. ANDREW SHAPIRO: A software platform, right. PHIL PONCE: Let's get John into this. PHIL PONCE: Paul Gillin, as one looks at some of the witnesses who have been testifying again, some of the witnesses who have been partners, companies that are partners with Microsoft, this is - what does this trial show about the nature of relationships in that industry - I mean - if these are your friends, what would your enemies do to you?
PHIL PONCE: So, Mr. Gillin, are you saying that some people are - some competitors are looking at this as a point of opportunity, as some vulnerability on the part of Microsoft? |
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PAUL GILLIN: Well, wouldn't you, if you were competing with a company that was many times your size and could stomp you into jelly whenever they wanted, you would naturally turn to any avenue that would prevent that, and the government has offered an appealing avenue here. However, I think this case is far from over. I think that whatever the result is, it's likely to be appealed, and I think it'll be some time before we have a resolution here. Remember that the case against Microsoft was overturned at the appeals court level. So the government is taking a case upstream that has already been ruled in Microsoft's favor by a lower court. PHIL PONCE: Mr. Shapiro, does that mean that Microsoft is really - notwithstanding the allegations - in a position of power at this point, legally speaking? ANDREW SHAPIRO: I think Microsoft still has - there's a high likelihood
that it'll win at the district court, and I agree with Paul that on
appeal, I think they're going to - I mean, the DC circuit here in Washington
has already tipped its hand a bit. But, again, what's more important
than the result in the court of law, I think, is the result in the court
of public opinion. How is this really changing the way people perceive
PHIL PONCE: John, in the short time we have left, Microsoft obviously has not put on their case in chief. What is Microsoft expected to argue when it's their turn? JOHN McCHESNEY: Well, they're going to argue - one thing that they argue consistently throughout this is everybody does it, so it's okay for us to do it, which legally I think is a questionable - a questionable tactic. They're also saying that this is the federal bureau of complaints; that these are competitors who've lined up to use the Justice Department, that it's a setup, that Microsoft has worked - that these competitors have worked closely with the Justice Department in order to set this case up, and that's what it is; it's government interference on the part of their competitors. They refer to Netscape, for example, as a ward of the state. PHIL PONCE: Gentlemen, that's where we'll have to leave it. I thank you all very much. |
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JOHN
McCHESNEY, National Public Radio: Well, recently, we've had this gentleman
from Intel, which I'll talk about in a minute. Before that, we had Apple
Computer and AOL, America OnLine - America OnLine saying that the only
reason that it dumped out of Netscape and put the Microsoft Internet
Explorer on their service was because it gave them access to Microsoft's
monopoly in the desktop, and that's why they did it. 
PHIL
PONCE: Here you have a vice president of a partner of Microsoft giving
this testimony. 
ANDREW
SHAPIRO, Aspen Institute: I think it has started to have an impact on
Microsoft's image. And the interesting thing is that the Justice Department
really understands that this case is about two things: legal trials
are on the one hand about dispute resolution, who wins the case. But
Justice understands, and it's understood from the beginning a year ago
that this is about something much bigger. It's about educating the public
about this new age that we're entering. It's about educating them about
the importance of technology and, in fact, the politics of technology,
this question of who controls the desktop, of whether Microsoft can
have a monopoly and extend that monopoly into so many important areas
like what kind of commerce we have online, if they can lock that up.
I mean, that's why, frankly, people who are afraid of Microsoft include
not just software companies but banks and retailers and travel agents
and others. 
PAUL
GILLIN: I would differ with Andrew on that. While I agree that the industry
is focused on standards for fair play, that's largely the industry talking
and there's no indication that consumers have made this a very important
criteria in their buying decision. Also, on the issue of Open Source,
I would differ that that is a significant threat to Microsoft at this
point. I think Open Source, which basically software that is in the
public domain and is freely enhanced by programmers all over the world,
is a wonderful development for the computer industry because it does
create choice; however, if you are Microsoft, you are pointing to Open
Source right now and saying, look, there is choice, consumers do have
choice; the government's case has no merit. 
JOHN
McCHESNEY: That's an allegation of course that they've done that to
Java. Just one thing about this Intel testimony, I think the government
has shown here more clearly than in some of the other cases that consumers
may have been hurt, that NSP multimedia software was withheld from the
market by Intel and it could have been moved along much more quickly
and the government in this case I think has made their point, that that
has retarded consumer choice, much more clearly than in some of the
other cases. I think the government has had a hard time making the case
about consumer - consumers being hurt. But in this case I think they've
got a point. 
PAUL
GILLIN: Well, no one has ever made much money by competing directly
with Microsoft, and it's generally not a good bet to cross Microsoft.
So the industry actually has a lot to gain by limiting Microsoft's power,
and this goes across all dimensions of the industry, including companies
like Intel. Intel is not wholly beholden to Microsoft and would like
to see a more robust choice available in operating systems, much as
Microsoft is not beholden to Intel. So I don't think anybody who has
taken the stand in the last four weeks has done so with complete impunity
and freedom from bias of an interest in this case. The computer industry
has quite a divided attitude toward Microsoft. On the one hand, they
want to see a company that is aggressive and competes - successfully
in the market rewarded, and there is no doubt, Microsoft has done that.
On the other hand, the whole industry is scared of Microsoft because
they fear that Microsoft can move into their backyard and can stomp
them flat with almost a moment's notice.
technology,
software, the computer, Internet industries, and I frankly do see a
chance, and I think that when people start to look at this, I mean,
you know, we've had the scrutiny of Microsoft in the antitrust department
since 1989, and it's only in the last year that this has really come
to the floor, when a spotlight has been shone on Microsoft's practices.
It's allowed its competitors to come forward, and that's a good thing.