An open letter to Judge Thomas Penfield Jackson, presiding over the Microsoft vs. Department of Justice case, from Peter White, CEO Computerwire Inc.

Dear Sir,

Your court has the power to curb and re-direct the efforts of one of the world’s most ambitious corporations – Microsoft, eliminating its habits of deliberately pushing the limits of monopoly abuse and re-focusing it on genuine innovation.

While the world looks on to a courtroom drama that mostly worries about whether or not Microsoft has done what the court has told it, it becomes ever clearer that the court has not gone far enough in its judgment and should use the appeal as an opportunity to stiffen the sentence.

It doesn’t take a lawyer’s understanding of the Hart-Scott-Rodino Act to see that these laws are a natural extension of the capitalist system in general and the manner in which Wall Street pursues that model in particular, and that they are as necessary as night coming after day. They were installed to check anti- competitive behavior and they are not intrinsically anti- American, far from it, they are an extension of the American way.

Companies will clamor for both excellence and, more importantly, control within a market. In the computer industry, architectural control can always be leveraged to give obscene advantage in neighboring fields, especially where the influencing architecture underlies the area under attack. Is anyone who is not on the Microsoft payroll or a major shareholder; or in their right mind, going to suggest that Microsoft products have earned their position solely on their design merits or individual product marketing efforts?

There’s no-one that ever worked at Stac Electronics who you’ll convince had an inferior compression product to Microsoft; likewise no-one at WordPerfect is likely to concede that the market asked for Word over WordPerfect. No ex-Borland developer will say that Microsoft tools were, after all, better than Borland’s (unless he was subsequently poached to work at Microsoft). The last decade is littered with the corporate dead and dying that have had the bad luck to operate in spheres close to Microsoft’s.

The same might be said of Excel and Lotus 1-2-3 and a succession of other product invasions successfully carried out by Microsoft. The biggest truth about the computer industry during the latter half of the 80s and through the 90s hasn’t been the internet. It has been that Microsoft has terrorized the industry in a predatory fashion and not through innovation, as it claims. Microsoft has flourished (through no fault of its own) in an era when anti-trust objections were unfashionable and it is during this period that it developed its competitive habits. You have to have sympathy for any executive trying to live up to the Wall Street technology bull market which anticipates the penetration of technology through something as all pervasive as the internet. Investors expect companies to have worldwide markets overnight, 100% plus annual growth and no downside. For a mature outfit like Microsoft even repeating 35% growth on $13bn next year means finding $4.5bn of business that it doesn’t have this year. Somebody else’s business.

Now, as we are set for a fantastic adventure coordinating and exploiting the internet over the coming decade or two, Microsoft just HAS to consider annexing it to fuel this growth. That’s right and good and its investors should be disappointed at anything short of a full and vigorous attempt. But it should only succeed on merit and this legal case is probably the last chance to force Microsoft’s efforts to be totally in the spirit of Hart- Scott-Rodino. This business is moving too fast for any of us to predict where it will be in the two to three years it would take to bring another case. It was years ago that Microsoft wrote its contract that bundled its operating system at the point of system purchase with all the varied PC systems. A law student could have told us unequivocally that it was an anti-trust breach then, as it is now, but nothing was done.

Now we are at our last chance and we need to establish clearly what is fair competition and what is not. How can three versions of Windows 95: one with Internet Explorer bundled; one with it ripped out; and one with it hidden; all be the same price? A dominant player cannot be allowed to give away anything that ties people into its technology because it should be charging a fair price or else it is subsidizing the action from a monopoly supply position.

It is okay for Netscape to do this, because it doesn’t have a dominant position to abuse. It actually plans to make money out of this gift to the market and is relying solely only on future associated revenues.

Microsoft wants those future associated revenues too, but cannot be allowed use abusive dominance to gain them.

Let’s look at those potential revenue streams. Control of E- Commerce will come indirectly from controlling browser installs. That is all online shopping and banking, in other words everything that can be sold electronically, which is virtually everything. Browsers can deliver secure transactions; security certification; the route to a full digital internet identity for everyone on the planet; Electronic Data Interchange back office communications between every corporation and its suppliers and access to oceans of information; not to mention access to everyone’s home internet use; delivery of video objects of all types; and eventually strong leverage into the future set-top or home entertainment computer. Do we really think that Microsoft automatically deserves a percentage of every part of this simply because it wrote a nice operating system once many years ago? In turn this type of internet dominance would release the potential to unleash a bid for control of banking proper and entertainment proper, in which, funnily enough, Microsoft has already exhibited a healthy interest.

This will all begin to take shape over the next three years and we have to establish some ground rules now – not at some future date.

Yesterday we reported that Microsoft Corp’s forthcoming Windows 98 operating system is being put under the microscope by prosecutors in 11 US states which have subpoenaed the software giant to provide details of its next upgrade to Windows. We reminded everyone that Windows 98 is completely dependent on the browser metaphor which is plumbed through and through the operating system.

So here is the nub of the problem. If Microsoft is merely asked to unbundle IE from Windows 95, and in Windows 98 is allowed to keep the metaphor throughout its operating system, there is only one way to segregate it from IE over the internet and that is to have an optional internet icon.

So you would use IE to wander around your hard disk, and perhaps the network neighborhood but as soon as you go out to the internet you would choose whether or not to go with IE or with an independent browser such as Netscape. But even if they are both free, Microsoft would automatically win that fight by having the look and feel of IE already trained in to every computer user. Why learn IE AND Netscape, when you have to learn IE and it’s free?

This is truly brilliant and only now can we appreciate the genius that drove the decision almost two years ago when Microsoft said it would embrace the net and adopt hypertext for everything. The court’s problem is that given this, how can we develop a truly even playing field so that others can compete fairly?

Ideally we should have a market leader (Microsoft), a strong competitor (Netscape, Sun, IBM, anyone else) and at least two or three minor market players before this market is healthy and non- monopolistic.

But now that Microsoft has taken what was an exceptionally brave step of borrowing the hypertext metaphor for an entire operating system, we need a second player that does the same. There must be space for someone, a company with vision and guts, to decide to backward-build an operating system using the same hypertext metaphor around another browser, before we can have true competition in this marketplace. Sun is capable of this, as might be Netscape and others, but who will do it if the court openly concedes to Microsoft its right to bundle, and therefore its right to the market, before a line of Windows 98 code is uncovered.

The answer of course is to enforce unbundling entirely. To set a price on browsing the net (small 12,000 line program) that is in line with the cost of development. To set a price for an operating system (massively more complex and bulkier) that is set in a similar way, and a machine price that is again separate.

To walk into a retailer and say I’ll have Windows 98 and the Netscape browser and pay the same price for it as a machine with Windows 98 and IE, is not enough, because the habit of using the IE metaphor would destroy Netscape. The price must be different and extra to add IE, even if it is not extra to add Netscape. And yes, this is fair.

That decision would not be popular with big users and customers, but they don’t actually care whether the market is fair, and mostly grew up in an era of abuse when they just expect Microsoft to take all the goodies. The court has this power, a precedent in the unbundling aspects of IBM’s consent decrees, and needs to avert the biggest corporate disaster in technology history by being brave about it.

It’s not that I don’t want to watch the Microsoft movie, on a Microsoft TV driven by a Microsoft set-top interface, delivered by a Microsoft line using a Microsoft protocol. It’s just that I want the choice, and I think America would applaud a courtroom decision that gave us all that choice.