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DOJ Wary Of Breaking Up Microsoft
Tava passed along a
Washington Post article
in which unnamed "people familiar with the discussions" in the Justice Department suggest the government is worried about overplaying its hand. If these rumors are correct, we won't be seeing any bold strokes taken against Microsoft - and apparently, breaking up the company would be considered very bold, whether into identical "BabyBills" or distinct companies for OS and apps. The DoJ's recommendations to JudgeJackson are due by the end of the month.
(Oh, and a point of English for the folks at the Post: the opposite of "leaningtoward" is not "leaningagainst.")
Here, in Microsoft, we have a convicted "criminal organization" that is a monopoly in the world, let alone in the US, and the government seems all of a sudden loosing it's nerve.
I've heard some rumours that the US government is actively studying the impact of completely abandoning Microsoft and going elsewhere, and Linux was definetly being considered.
Here in Canada, the same thing is happening. The governemnt has several pilot projects running Linux and there are currently several configurations being considered running the Federal Parlamentary networks as well as in the Bank of Canada and the Department of Defence.
Furthermore, we have no vested interest in keeping foreign companies that don't benefit our economy as viable entities in Canada.
I think that there's gonna be problems no matter what they decide to do. Had they figured this out back in 96 there wouldn't be as many problems as there is going on today.
MS obviously thinks that they're immune to whatever the DOJ has planned for them. They've tightly integrated even more stuff into Windows than before, even in the midst of the legal battle.
They've also hired a political guy to rally to the other political guys and get them to do what MS wants. They think that they have money and are more powerful than the government.
Breaking up MS will cause some problems, namely because unlike AT&T, there isn't any real obvious way of doing the breakup. The different parts of MS compete against each other even today (from what I heard... which is why WebTV isn't obligated to use Windows as their platform) and even being part of the same company.
I think MS should go the way of IBM. IBM has to publish specs for whatever they do, if people could make their own platforms & file formats TRULY compatible with the Microsoft ones, the world would be a much better place.
As it is, what MS publishes now, only are sorta kinda like the real deal, and anything compatible that people want to create, they have to do a lot of guesswork, and even then there still are problems.
Another thing that the DOJ could do would be to make MS sell a version of their OS without all the little wingdings and dingdongs. No IE, no media player, etc. No links to service providers, and especially no hard-to-get-rid-of link to MSN. Sell it for $30, and then sell your everything-plus-the-kitchen sink version for the $99 "upgrade" cost.
If a "Micrsoft Standard" dominates some sector, the it should be FORCED to be opened, with complete documentation. This includes file formats as well as protocols.
2. No exclusionary contracts.
We should also study why the 1995 consent decree failed, because it was supposed to stop this, and didn't.
3. No gag orders in the license.
If a product is #$%^, the knowledge needs to flow in order to allow the market to correct.
The foundation of capitalism is the free market.
The foundation of the free market is the informed consumer who can choose. Restraining either the information or the choice is bad for the free market, and turns the economic system into something other than capitalism. It both proves and disproves Karl Marx, because it leads to the fate he describes, but I assert that it's no longer capitalism.
My suggested remedies apply to Microsoft at the moment, but they are equally applicable to any business. Consider the market dominance AOL is achieving, yet at the same time their wire protocols are closed. They are now big enough that this may need to change.
But then again, there'd be other changes, as well, if I were IN CHARGE.
The living have better things to do than to continue hating the dead.
Look -- why does Microsoft NOT want to be broken up?
One word: synergy.
However, synergy is the one thing they can't legally use when it comes to maintaining monopolies, however fairly they came by them.
So, without a breakup, we will be asking the company to fight an irresistable urge to use synergy a hammer to crack open new markets and as a bulwark to prevent entry of competition. They will skate as close to the edge as they think they can get away with, if not brazenly step over it, unless draconic and intrusive regulation is employed. That's a loss all around -- the taxpayers will pay for ongoing oversight and future lawsuits, the company will be hobbled by interfering and hostile lawyers poking their noses into every decision they make. And taking them to court.
There are two kinds of breakup scenarios, both of which are preferable from the stockholder's point of view to hyper-regulation.
The first is the breakup of the company into directly competing, homogeneous units. This is bad because most of the value in these competing units will quickly be destoryed, and one victor will eventually emerge, using synergy to crush all of its competitors -- probably the one who gets the most credibility, the one headed by Mr. Bill. This is obviously bad for competitors because maybe 2/3 of the value of their stock will just evaporate, but over the long term they will end up with a company just as powerful as the one they enjoy today, enjoying monopoly profits. A few years of compound interest growth and they're back on track.
I obviously don't support this scenario, since in the end it accomplishes nothing. A humungous fine would be faster, simpler, and Uncle Sam walks away with change in his pocket instead of pouring money into lawyers and beareaucrats to accomplish essentially the same thing.
The second breakup scenario is to break Microsoft into different companies based on product line. In this scenario, the stockholders continue to enjoy their OS and office suite monopolies, plus a very strong back office product line. No shareholder value goes away, except that which comes from the forbidden synergy. The companies are free to maintain their monopolies by dint of superior features and simple market share, but cannot erect extraneous barriers to entry such as secret APIS.
As far as this affecting open source, the status quo with a few provisos on opening and documenting APIs would be ideal. Right now, companies like IBM support open source becasue the barriers to entry into the software market posed by Microsoft power is too high -- better to destroy the market in software and remain unbeholden to Redmond. A defanged Microsoft would probably dampen their enthusiasm. This is another reason that MS stockholders should probably prefer the functional breakup, since it strengthens the existence of license based markets in software on which their profits depend.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
The Congressional representatives from Washington (who reap alot of financial campaign benefit from Microsoft support, BTW) will use their political power to try to minimize damage to the "home team", so to say. So I'm not surprised that Of course attorneys are going to try NOT to hit Microsoft too hard -- there's way too much money and power on the table.
A structural breakup works because securities law forces each of the so called baby bills to maximize profit individually -- even at the expense of other M$ operations. While the gov't attorneys wonder if "breakup plans, such as dividing Microsoft into an operating-system company and a software applications company, might be ineffective in breaking the company's lock on the market for personal-computer operating systems.", I personally don't see any other way.
Anyway, I hope that Judge Jackson understands things well enough to see that unless a breakup is the remedy, M$ will attempt to go on with business as usual, like was mentioned in a C/NET Article on Monday -- bundling as usual in Windows ME (Millenium Edition's new name).
My hope is that the judge chooses the remedy, then implements it in a way that will minimize the risk of it being overturned.
IMHO This doesn't have to be a win-lose for anyone -- the M$ stockholders could benefit, each M$ division would be free to innovate, and yet the playing field for the rest of the world would still be more level than it is now.
...Open Source isn't the only answer -- but it's almost always a better value than the alternatives...
First of all, I have the distinct feeling that this was leaked out by Microsoft in order to help out their plummeting stock price. But let's assume it's true, and the government is being a wuss about this whole debacle.
Now, I'm no fan of governments, far from it. However, I'm also no fan of huge corporations. A couple centuries ago, some of the insanely rich people who ran our country realized that sometimes it's good to restrain other insanely rich people from becoming increasingly insanely rich. The reason, is that if those ambitious businessmen (read: greedy assholes) who were already insanely rich started proceeding in an unsporting way, they may keep the others from being as insanely rich as they are. Thus, we have the antitrust acts.
But here's the deal: The rich created the government, including the whole *concept* of government in the first place. No poor farmer in the middle of revolutionary America thought "Yes, let's overthrow the British aristocracy, and replace it with something a little more close to home." Jefferson, Washington, Franklin, Madison, etc., were the bourgoisie of the time, and thus imposed their ideas of a government on people who had just helped them revolt from the last one.
And so, Microsoft benefits greatly from the advantages of having a government around to do it's bidding. How? Well, there's the obvious IP laws. Who does MS go to when they find somebody who is pirating their software, en masse? The government. They also have other advantages that they get from the government, including the use of prison labor to package their software, and I'm quite sure that the cities of Redmond and Seattle, as well as the state of Washington, have gone to great lengths to accomodate them in any way they could (corporate welfare, repealing of land development laws, etc).
But now, the government feels squeamish about angering Microsoft? Why? Microsoft only exists because of the government, why are they scared?
Well, here's my little conspiracy theory:
The insanely rich of our time (C. Wright Mills called them the Power Elite, but I prefer Marx and Bakunin's term, the Ruling Class) have two conflicting problems in Microsoft: First, Bill Gates is not a part of the ruling class, despite his wealth. The reasons are that he did not go to (and graduate from) the right schools, his parents are merely upper-upper-middle class, and his wealth is mostly stock value, not hard, concrete, built-off-the-labor-of-slaves-and-immigrants wealth like that of the DuPonts or the Vanderbilts. Because of this, and because Bill Gates has tried to enter into the ruling class, the DOJ case is a matter of showing Mr. Gates where his place is in the social darwinist jungle.
On the other hand, what we've found amongst the ruling class/power elite is an interesting progression of capitalism. It's nothing really new, globalisation, it's basically a mixture of laissez faire theory, colonialism, and a little bit of fascism mixed in for good measure. The basic idea is, however, that government intervention and interference is not a good thing. So what you have is a generation of the ruling class who hasn't read their history properly. They don't remember the causes of the great depression, or any of the various recessions. They simply read their Friedman or Rothbard and insist that those theories are implemented.
Remember, capitalism is highly unstable. Think what would happen if Microsoft were to continue growth unchecked, without fear of government intervention. They could grow to huge proportions, encompassing massive industries and markets. Then, when they're valued at about 3 trillion dollers, their stock value plummets. How would that affect the economy? Exactly. So, we have governments and certain restrictions to make sure that that doesn't happen (unstable economy == popular revolution, usually).
But now, like I said, we have a generation of the ruling class that hasn't learned from history. They're doing things like repealing the glass-steagall act. They're allowing the CBS/Viacom and AOL/Time-warner mergers to go through without so much as a peep. They may talk about "getting government off our backs", but in reality, they keep increasing our military, increasing the police force, and increasing corporate welfare. Why? Because when the second great depression hits from all this unchecked capitalism, they'll need a strong military and police force in order to preserve "peace".
Republican rhetoric about small government sounds well and good when you're listening to Rush Limbaugh, but the reality is that although personal welfare has been reduced and limited, schools are underfunded, and health care is expensively privatized, the government will still be doing it's best to break union strikes, beat down inner city rebellions, pepper spray peaceful protestors, as well as spreading this form of American "democracy" across the globe. And at the same time, they'll be cutting a check to GM in order to keep them from moving yet *another* plant down to Mexico so they can exploit cheap labor. And then GM will move down anyways.
So, what am I getting at? Well, basically, my point is that we should be worried. Worried, and angry, because the government would dare be scared at the prospect of breaking up Microsoft, when almost all of Microsoft's wealth has been acquired with the help of the government and government intervention.
What have we gotten ourselves into?
Michael Chisari
mchisari@usa.net
MS is found guilty of bundling. Government says, "Stop that!" Hardware makes say, "Uh, yeah, stop that!" MS says "Okay. ;-)"
Everyone says, "Hey, didn't we tell you to stop?" MS responds, "Yes, and we did." "Then why are you bundling IE?" asks the government. With a sly smile, MS responds, "Its not bundled, its integrated."
In unison, the entire industry shouts, "What's the difference?!" Unfazed, MS responds, "I don't know, you tell me." "Uh, well, um... we'll get back to you."
The government sues, "wins", then asks "Now what?" In the face of immanent breakup, MS responds by proclaiming, "The best is yet to come."
Meanwhile, in Redmond, the following conversation was taking place... "Have the marketing guys got it together yet?" "Yes, we're ready regardless of what happens. If they break us up, we release the source to everything but Win2k. It will only be a matter of days before the hackers exploit all the security holes and thousands of companies, and the government itself, will be faced with either replacing all their software, retraining their staff, and hiring competent admins, or upgrading to win2k. We estimate that 50% will upgrade in the first 2 months, another 20% in the next 6. We estimate a 25-30% loss." "And if the don't break us up?" "The slpashscreens have been removed from all our MS Office apps and the all references to Office have been replaced with Win2k Office. Our marketing guys should be ready to roll with the new campaign within a couple of hours after the announcement."
There have also been rumors of what sounds like laughing emanating from the MS's Redmond compound.