Microsoft case: yesterday's war?

As the US government wraps up its antitrust case against Microsoft, it seems likely that one of the most important factors shaping the historic suit's outcome will be change - the nanosecond-fast pace of evolution in the software industry.

During the last year, while Microsoft and Justice Department lawyers have jousted in a sixth-floor federal courtroom, the market for such key software products as Internet browsers has changed radically.

This doesn't mean the Microsoft suit has become moot. But it does point out the difficulty of adapting trustbusting methods pioneered by Teddy Roosevelt to the Information Age.

It may also mean that the federal courts are unlikely to favor aggressive sanctions against Bill Gates's company - such as shattering Microsoft into a number of smaller "Baby Bill" firms.

"It's conceivable the courts could order it, but it is very unlikely that Microsoft will be broken up," says Robert Litan, Brookings Institution director of economic studies.

By legal standards, the Microsoft antitrust trial has been jogging along at a fast pace.

First filed by the Justice Department and 20 states in May 1998, it debuted in the courtroom on Oct. 19 last year.

Since then, US District Court Judge Thomas Penfield Jackson has heard testimony or read statements from more than 100 witnesses. Thousands of pages of exhibits, including crucial internal Microsoft e-mails, have been admitted as evidence.

Bill Gates himself has appeared, via a videotaped deposition that Justice Department lawyers used to great effect. They took snippets of tape in which the Microsoft chief said one thing, and interspersed them with company e-mails and other documentary evidence that appeared to indicate the opposite.

Closing arguments ended Sept. 21. In their last opportunity to sway Judge Jackson in person, government attorneys argued that Microsoft is a monopolist that has used its dominance in operating-system software to try to crush competing firms.

In particular, claimed the government, Microsoft added its Explorer Internet browser to its Windows operating system not to help consumers, but to outmuscle Netscape Communications Corp. and its rival browser.

Microsoft's moves have "cost consumers untold millions ... of dollars," said New York State prosecutor Stephen Houck.

Microsoft attorneys, for their part, reiterated that the government seems less interested in helping consumers than in helping Microsoft's competitors - many of whom lobbied the US to bring the case - and that the firm is nothing more than a tough competitor in a very tough marketplace.

"The government should not be siding with Microsoft's opponents," said firm attorney John Warden.

Trial observers give the government high marks for its 77-day performance. Many ascribe this to lead US attorney David Boies.

An eccentric trial law expert - he buys cheap suits in bulk and has been known to eat lamb chops by hand - Boies has exposed and exploited every chink in Microsoft's case.

"The government, on a scale of 1 to 10, has been somewhere between a 9 and a 10," says Mr. Litan of Brookings.

But even as Mr. Boies was gleefully tripping up witnesses, the context of the case was changing around him. Internet time moves much faster than legal time.

Since the trial began, America Online has purchased Netscape for $10 billion, combining two of Microsoft's rivals into one much larger firm. The number of Americans with Internet connections has exploded, expanding the universe of consumers who can bypass Microsoft products by plucking software from a distant computer server.

Even rival operating systems, such as Linux and Unix, have made gains.

All this has bolstered a central tenet of Microsoft's defense, say some experts: Today's apparent software monopolist is tomorrow's Internet road kill.

"It's tremendously important that there are these underlying dynamics that are changing just daily," says Thomas R. Hazlett, an economist and resident scholar at the American Enterprise Institute in Washington.

Old antitrust rules need to be rethought in today's world, argues Mr. Hazlett. In the old model, he says, giving products away was viewed suspiciously, as it could be seen as an attempt to crush a weaker competitor.

But in the software industry, it's a normal way of building market share.

"This kind of behavior is a powerful way of providing new technology to the public," says Hazlett.

The first important ruling in the Microsoft trial could now come within weeks or months. Jackson is expected to outline his own findings of fact - in other words, who he most believes, Microsoft or the government.

His decision as to whether antitrust laws were violated will come some months after that.

Appeals could stretch on for years. The government has hinted that it might support a breakup of Microsoft similar to that which split AT&T.

More likely, say experts, would be legal remedies which aim at keeping close tabs on the way Microsoft does business, to prevent the stifling of competition.

(c) Copyright 1999. The Christian Science Publishing Society