Keeping The Beast At BayKeeping The Beast At Bay

Microsoft has been likened to a beast that eats at the trough of industry innovation. It is well known that venture capitalists are loath to fund any business that competes with the Redmond goliath. So, a chill was felt in the industry when the U.S. Court of Appeals reversed Judge Jackson's ruling that ordered a breakup of the company.

It was not, however, an unexpected event. Most people assumed that the original verdict wouldn't survive the appeals process. Of greater significance is that the appeals court agrees Microsoft has a monopoly position in the operating-system area and that it used its power illegally to maintain that position.

Now, the question--and major concern--is what to do to ensure that competition is not further stymied by Microsoft, especially since the company seems to have no inclination to change its behavior, as I pointed out in my prior column, ("Microsoft: A Clear And Present Danger").

Microsoft has continued its practice of trying to build exclusionary partnerships that freeze out potential competition. One might think that the experiences of the embarrassing trial and drastic remedy ordered by Judge Jackson might have changed Microsoft's tactics, but that has not been the case.

In recent months, Microsoft has tried to make a deal with AOL to drop RealNetworks software in favor of Windows Media Player, and to allow access to AOL's Instant Messenger in return for leaving the AOL icon appear on the Windows XL desktop. Other actions have included testing "Smart Tags," a feature that would paste links to Microsoft-affiliated sites on Web pages without the permission of the page owner, and the inclusion of Microsoft Passport, a universal mechanism to pay for Web purchases, in the installation sequence for XP.

Microsoft's position is that it is adding these attributes to Windows for the benefit of the consumer, and that the features are direct examples of the company's innovation. It is indeed convenient, for example, to allow Windows Media Player to be your default audio/video device, because it is integrated into the Windows code. But you have to wonder how much this creeping expansion of the Windows operating system costs the average computer user, compared to what it would be in a competitive marketplace.

Over the past five years or so, the price of the personal computer has dropped significantly, while providing us with amazingly increased performance in speed, capacity, and design. At the same time, the cost of the Windows operating system has increased quite substantially. Put another way, the operating system is a far higher percentage of the cost of the system than it used to be. We are all paying for Microsoft's supposed innovation that the company is bundling into Windows.

Here's One Solution
So here is what I propose. Let the court tell Microsoft that it can innovate all it wants. It can build all of the goodies it desires to enhance Windows. All it has to do is publish the detailed interface specifications as it develops the new products. That will give others an opportunity to connect to Windows as seamlessly as their ingenuity and entrepreneurship permits.

Explain to Microsoft that, if it wants to integrate a new video imaging system, a new DVD mastering system, a Web-buying wallet, or any other feature, that is perfectly all right--so long as the cost is not bundled into the price of the operating system and the interfaces are known and available to others.

Then, make sure that the playing field is level. When you install Windows, you can unlock a new feature--for a price. Or you can decide to go out and buy someone else's software enhancement. If Microsoft is playing fair, the price of Windows is stabilized, and the consumer has increased choice and probably a lower overall cost.

There are difficulties in what I suggest. Not the least of those difficulties is requiring Microsoft to be monitored so that it doesn't cross-subsidize product development (giving Internet Explorer away free was perhaps the most egregious example of this practice) or neglect to release the interface specifications in a timely and comprehensive manner. The alternative, however, is the continued expansion of Microsoft into multiple areas of electronic commerce without reasonable checks on its behavior. That possible future is not a pleasant vision to contemplate.

Robert M. Rubin is CEO of Valley Management Consultants, a firm specializing in E-business and information technology strategy, organizational design, and evaluation. Prior to joining VMC, he was senior vice president and CIO for Elf Atochem North America, a $2 billion diversified chemical company. The recipient of multiple industry awards, he is a contributing editor to information and a member of its advisory board. He can be reached at [email protected].