Dismantling Monopolies: Be Careful What You Wish For
By Stuart J. Johnston
Links To Related Web Sites:
Join a discussion about the case at Reply To All, InformationWeek's Online discussion forum. http://www.informationweek.com/ replytoall
U.S. Department of Justice's filings in the Microsoft case http://www.usdoj.gov/ atr/cases/ms_index.htm
Microsoft site dedicated to current and pending lawsuits http://www.microsoft.com/ presspass/doj/doj.htm
his week, with arguments beginning in the government's antitrust case against Microsoft, several key issues that will influence not only Microsoft, but also the broader economy into the next century, are being played out.
And the outcome of the court case will not only affect Microsoft and its competitors, but just as importantly, it could have significant long-term consequences for the buyers of technology goods and services.
Recently, when I moved for the first time in 10 years, I had an experience that brought some of these issues into clear focus. Nearly everything went smoothly during the move, with one exception: my phone service. Although I was braced for problems with my local phone company, since virtually every dealing that I've had with it in the past three years has been problematic, I was not prepared for the nightmare I encountered.
For weeks before the move, the phone company assured me that everything was fine for moving my four phone lines. Then, less than a week before the move, trouble started. To describe the myriad problems would be too complex. Let's just say that after two weeks, the company finally installed all but one line.
Then, a couple of weeks later, I noticed a work crew drilling beneath the parking lot of my condominium complex. When they were finished, there was a new phone cable sticking out of the ground next to my unit. In doing this, the workers had managed to drill through the existing phone service for half of my small condominium complex. It took eight days to restore service to everyone, despite repeated phone calls.
Being without a phone for a couple of days drove home what was meant by the term "essential facility," which was used in the AT&T antitrust suit that led to the company's breakup. Many advocates of tightly regulating Microsoft have espoused the idea that the operating system constitutes a similar essential facility and thus ought to be regulated like the phone companies.
I'm not sure that comparison is apt, however. After all, I can buy a PC and, even if it comes with Windows 98, I can get a different operating system for it. There are several available, including OS/2, BeOS, Linux, DR-DOS, and SCO's Unix. Though it's arguable that most consumers would not switch from an operating system that comes on a new PC, there is choice.
Phone service, however, is different. No matter how dissatisfied I am with my local phone company I cannot choose another provider. There have been legislative and judicial efforts to change that--for instance, to allow the cable companies to offer phone service and to let the phone companies offer video service. But, as James Love, executive director of Ralph Nader's Consumer Project on Technology, has pointed out, instead of fostering competition between cable and phone companies as the Telecommunications Act promised, the phone and cable companies have instead chosen not to compete.
I covered the court-ordered breakup of AT&T in the early 1980s and I disagree with antitrust advocates' view that the government "broke up" AT&T.
In reality, AT&T agreed to divest itself of many parts of its business that were less profitable and some that were downright unprofitable, in exchange for approval to move into new markets. I submit that it was a sweetheart deal for Ma Bell that allowed the government to save face at folding the longest-running antitrust suit in history, while letting AT&T clean house.
Sure, there is more competition today in some areas of telecommunications. There are dozens of long-distance providers scrambling for customers' business. There have also been some gains, mostly from the addition of new services. But despite the newly competitive environment, my phone bill has never decreased, and I have wasted a lot more time dealing with all the different phone service providers and sorting through a morass of bureaucracies. And when it comes to local phone service, I still have no options.
What does all of this have to do with the current case against Microsoft? Lots. At stake for Microsoft is control of its own destiny and what is at stake for the government is the question of whether antitrust laws remain relevant and effective into the 21st century. But what is at stake for users is a question of whether the current status quo is better than a world with no dominant player deciding standards.
Indeed, in the past couple of weeks, the government has indicated that if it wins its case it will seek some form of "permanent" enforcement against Microsoft. While it may seem like a long shot to many of us, one of those options would be to seek the breakup of Microsoft into separate companies--one that sells operating systems and one that sells applications. Alternately, the government might seek to OK any major deals or developments that Microsoft wished to enter into. Both would probably be crippling for Microsoft. What the ultimate impact on the users would be is unknown, but the effects of the AT&T breakup prove instructive. Having watched the breakup of AT&T and personally experienced its long-term consequences, however, I have to caution: be careful what you wish for.
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