Background: Breaking Windows

June 7, 2000 at 12:00 AM EST
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TRANSCRIPT

JIM LEHRER: Today’s breakup order against Microsoft. We begin with the details of the judge’s order with the help of William Kovacic, Professor of Law at George Washington University. Welcome, Professor.

WILLIAM KOVACIC: Thank you.

JIM LEHRER: Let’s go first, the judge’s order — he had some really tough words for Microsoft, did he not, accusing them of being untrustworthy? What’s that all about? What was the judge talking about in that?

WILLIAM KOVACIC: The judge issued a two-page statement that provides the context for his order, and basically describes the motivation for including the terms that he’s imposing. He calls the company untrustworthy. He says they are a recidivist that will not curb its behavior in the future. He says that there’s simply no point in imposing milder controls, and he draws upon a theme that he emphasized throughout the trial, that this is a company that simply can’t be trusted to obey the law.

JIM LEHRER: And he also made the point, did he not, that they have made no change since all this began, they’re still… at least under his view, they’re operating today the way they were operating when this whole thing began, is that correct?

WILLIAM KOVACIC: One of the main themes of his statement is that there’s a lack of contrition, a lack of self- awareness, a lack of repentance of any type. It’s almost the type of document that you might expect to come out of an ecclesiastical community. It’s so sharp and pointed in its observation that the firm not only shows no awareness of its violation, but has taken no steps to cure its sins.

JIM LEHRER: Okay, now that was the opening statement — I mean, the accompanying statement. And then the order itself calls for breaking the company into two. Now, explain what each of these two companies would do under the judge’s order.

Microsoft split in two

WILLIAM KOVACIC: One of the successor companies would inherit the windows operating system franchise and would produce the windows-related products. The second company would be responsible for producing the applications that run on personal computers, various software programs and would be responsible for the company’s Internet operations. These two successor companies would be the remnants of the former Microsoft.

JIM LEHRER: All right. Now, that second company, what would be its… what kinds of things are you talking about? Give me some specifics of the products that they would be dealing… manufacturing and dealing in contrast with what the other company would do with the Windows system.

WILLIAM KOVACIC: One of the most prominent would be the Windows Office suite, which provides a number of capabilities for individuals and business users. Microsoft also produces a number of software products that are designed to run with servers that are the backbone of many business-related computer systems.

JIM LEHRER: So in simple terms, there would be one company that would do the… have the overall browser, in other words, the way you would get to these various other software things on your computer, but they could not be… they’re related now, and the judge is saying, no, no, no. The browser will be a separate company from the other software things that the browser goes to. Did I understate that?

WILLIAM KOVACIC: The browser would actually be packed in to the applications company. The basic logic of the divestiture is that you want to deny the operating system company, the company that makes the basic Windows98 software package, for example, you want to deny it the incentive and ability to distort decisions about the design of software programs that run with the operating system in order to encourage others to design other types of applications, as well.

JIM LEHRER: Okay. Well, thank you very much.