Where Microsoft Really Went Wrong

Steven J. Searle

Web Master, TRON Web

On November 5, 1999, U.S. District Court Judge Thomas Penfield Jackson issued his Findings of Fact in the Microsoft vs. U.S. Department of Justice antitrust trial. He found, to no one's surprise, that Microsoft Corporation does indeed possess a monopoly in personal computer operating systems, and that Microsoft has done some very nasty things to its competitors to protect and extend that monopoly. He then gave Microsoft and the Department of Justice several months to reach an out of court settlement that would preclude him from issuing a ruling that Microsoft is guilty of having violated U.S. antitrust laws, something that could lead to a breakup of the company. Again, to no one's surprise, the out of court settlement talks failed to reach a mutually acceptable conclusion, and thus on April 3, 2000, Judge Jackson issued his Findings of Law in which he ruled that Microsoft did indeed violate U.S. antitrust laws. The judge has set a hearing date for May 24, 2000, so it will not be long before the world learns what penalties Microsoft will have to bear for employing its infamous "hardball tactics" against its competitors, and in some cases even its technology development partners.

A lot of people, including myself, think that Bill Gates really blew it on this one against the one power that could stop him in the only place where Microsoft's marketing muscle is meaningless--the Federal government of the U.S. in a court of law. Microsoft is already on the defensive due to rapid, unexpected shifts in the development of computer and networking technologies. Now, more than ever, the company has to be focused to survive. So taking time out to engage in legal jousting with the Department of Justice and the attorneys general of 19 states is not a very productive use of time or resources. Moreover, since Microsoft has now been declared to have violated U.S. antitrust laws, other forces have begun filing antitrust lawsuits against the company (at present, 140 private anti-trust suits are pending in 38 states). Not surprisingly, Microsoft's primary insurer, Zurich American Insurance, is balking at the potential liabilities, and it also has filed suit against Microsoft. For some inexplicable reason, Bill Gates has chosen to lead Microsoft right into the corporate version of the Bardo of Death, and the result is a phantasmagoria filled with legions of wrathful legal deities wreaking havoc on the company's image and stock valuation. Is this where the "road ahead" was supposed to lead?

But taking on the Department of Justice and state attorneys general in the late 1990s was not where Microsoft really went wrong. Where the company really went wrong was in failing to embrace "open standards" in the late 1980s. Microsoft, or should I say Bill Gates, seems to believe that where open standards exist, profit will be difficult to be had. But this is not at all the case, and one of his former employees has proved that to be the case. Mr. Ryu Koriyama, a former Microsoft employee who investigated and analyzed the TRON Project for Microsoft, is currently the chief executive officer of Aplix Corporation, a rapidly growing Japanese software firm that markets the Java on ITRON (JTRON) commercial product called "JBlend." Although JTRON is open technology that can be legally cloned by other firms, sales and profits are strong and the company is hiring new employees--in spite of the fact that Japan languishes in a severe recession! Yes, open standards not only produce profits, but they can produce them in the middle of a recession to boot. Compare that with Windows CE, a proprietary operating system for consumer applications that Microsoft has actually had to pay huge amounts of money to get some big players to adopt. Can profits be made by paying others to use your proprietary software?

In the spring of 1989, when the United States Trade Representative attacked the TRON Project on behalf Microsoft and other U.S. technology firms, I was asked by the TRON Association to present the TRON Project's position at a meeting with representatives of the U.S. government. Although I did not prepare any notes, I can still remember the three points I made to the U.S. government people present at the meeting. I told them that a "total architecture" like the TRON Architecture, which is designed for computerizing human society, allows for the creation of an unbelievably huge hardware and software market, since everything is compatible with everything else. Moreover, because the TRON Architecture is an "open architecture," it provides par excellence the "level playing field" for foreign firms that the U.S. government was demanding of Japan at the time. Finally, I pointed out that the U.S. government has always taken a firm stance against monopolies, rather than mollycoddle them, as the USTR was attempting to do. However, the U.S. government representatives' main goal in 1989 was to scare Japan into scrapping the TRON Project, so they showed little interest in what I had said.

How ironic it is that over the next decade none other than the U.S. government would verify each of those three points that I made at that meeting! By allowing Arpanet and its TCP/IP communication protocols to come into public use in the form of the Internet in the mid 1990s, the U.S. government has created a huge hardware and software market in which everything is compatible with everything else. Moreover, since those protocols are "open" and "royalty free" just like TRON specifications, a level playing field has been created that has allowed many new players to participate by introducing innovations. Finally, since one of those innovations, the World Wide Web browser developed by Netscape Communications Corp., was "targeted" by Microsoft for "take over and proprietization," the U.S. government finally got the courage to do what it has done historically--take a firm stance against a company with a monopoly trying to extend its monopoly. I sincerely hope the men and women of the USTR can see in retrospect how ridiculous their position was in the spring of 1989. They were literally trying to protect a technological wolf in sheep's clothing that would later gobble up one U.S. high-tech firm after another.

However, what is most ridiculous at this point in time is the vast amount of money and effort Microsoft is expending in its attempt to win this antitrust case launched against it by the U.S. Department of Justice and the attorneys general of 19 states. Even if Microsoft were able to win a complete victory on appeal, which is an extremely unlikely outcome given the breadth and depth of evidence against the firm, Microsoft will never be allowed to take over control of the Internet, either in whole or part, and tax its growth as it has taxed the growth of the personal computer industry. Any moves along those lines will meet with stiff resistance--most likely in the form of Internet antitrust legislation by the U.S. Congress, the European Union, and other G-7 governments. Moreover, such moves will accelerate the already rapid development of "alternatives" to Microsoft's products. In the end, open standards such as TCP/IP, GNU/Linux, and the TRON Architecture, will survive and thrive in the world of technology, just as democracy and the market economy survive and thrive in the world of politics and economics. If Microsoft could swallow its corporate pride long enough to see this fact, the company would at last be able to establish the foundations for its continued success in the 21st century.