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Playing hardball with software

By Stephen Humphries / January 25, 2001



It's not as if Bill Gates needs the money or anything, but were he to join the team of contestants on the "Survivor" TV series, many would say his chances of winning $1 million are good. Like the show's Richard Hatch, multibillionaire Gates has proven himself a master at building alliances with business partners, often to turn on them later, cornering their markets or pressuring them not to do business with rivals.

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The cost of Microsoft's business practices is made apparent by the end of Ken Auletta's "World War 3.0," a chronicle of the battle between Microsoft and the Department of Justice from the trenches of Judge Penfield Jackson's courtroom.

The author, a media critic for The New Yorker, provides a minutely detailed description of the case that is enlivened by his remarkable personal access to the combatants, including Gates, as we follow them negotiating the legal land mines of the Sherman Antitrust Act.

"World War 3.0" reveals that many of Microsoft's casualties were self-inflicted. From the outset, Gates & Co. blithely denied that they had attempted to torpedo Netscape's Internet browser, or that it was even on their radar. But the company's internal e-mails indicated otherwise, and these incriminating notes were deployed as weapons by the government's attorney, David Boies.

In Judge Jackson's interviews with the media and Auletta (a violation, incidentally, of judicial ethics that could have ramifications during Microsoft's appeal), he indicated that these e-mail messages completely eroded the credibility of the defense's witnesses. Hopelessly outflanked, the Redmond, Wash., corporation headed for the bunkers and waited for the offer of an armistice.

Microsoft had indeed waged war on Netscape by giving away a free browser with its Windows operating systems. Gates competed because he understood that Web-based software could potentially obviate the need for Windows. Additionally, the browser offered e-commerce opportunities if one could get users to enter the Net through one's portal ("Where would you like to go today?"), just as the mighty AOL has done so successfully.

Did this tactic work? It's crucial to note that millions of copies of Netscape have been sold and downloaded despite Microsoft's blitzkrieg. Even economist Franklin Fisher, a government witness, reluctantly conceded that Microsoft's actions hadn't hurt consumers. With 27 million members, AOL is also expected to dump Explorer for Netscape's next upgrade.

Given the above, one wonders why Microsoft is persistently referred to as a monopoly throughout "World War 3.0." The book gives many examples of varied competition to Microsoft (even a Sony PlayStation is a budding operating system).

The author might have done a better job of exploring how software companies can - and indeed have - broken down the so-called "applications barrier to entry" of markets dominated by titans like Microsoft. How? By initially giving a superior product away for free.

But the book is ultimately concerned with Microsoft's business practices, which are deemed "thuggish" and "coercive." It's important, though, to distinguish between a corporation that does business with a gun, and one that forges - and enforces - tough contracts that are voluntarily entered into because of mutual gains to be made.

Microsoft is hardly omnipotent: Nokia and RealNetworks have both spurned aggressive offers, and many Microsoft business partners haven't been afraid to invest in or promote competitors like Linux and Netscape.

Microsoft's days may be numbered even if the government leaves it alone, suggests Auletta. Not only does Gates lack the omniscience to foresee the evolution of a rapidly mutating market, but potential business partners are quoted as saying Microsoft isn't trustworthy enough to do business with.

On this evidence, Gates would be the very first person voted off the island.

Stephen Humphries is on the Monitor staff.

(c) Copyright 2001. The Christian Science Publishing Society