Frame Game

Microsoft Monopoly?

Microsoft Monopoly?

“Frame Game” is an occasional Slate department based on the premise that who wins in Washington is often determined by how the issue is framed. The author neither endorses nor condemns any of the views expressed, however laudatory or repellent.

On Jan. 13, a federal judge will resume hearing the Justice Department’s antitrust case against Microsoft. DOJ accuses Microsoft of violating a consent decree by leveraging Windows’$2 90-percent share of the computer-operating-system market to corner the browser market with its Internet Explorer. Microsoft says it’s “integrating” IE into Windows. DOJ says that the two products are separate and that Microsoft is illegally forcing computer makers to load their machines with IE–first by threatening to deny them Windows, then by artificially repackaging the two programs as one. Microsoft faces similar charges from competitors, consumer activist Ralph Nader, and possibly several state attorneys general. The press has turned against Microsoft, even comparing it to the tobacco industry. If Microsoft is so shrewd and powerful, why isn’t it winning this public-relations game? Because it’s overplaying tactics and neglecting strategy on several fronts:

1Power vs. beneficence. Is Microsoft too powerful? Bill Gates, like Bill Clinton, answers ideology with economic practicality, touting the country’s prosperity and taking as much credit as he can. Microsoft isn’t committing the sins monopolies are supposed to commit, Gates argues. Windows is cheap, and IE is free. Lots of companies are selling software, their products are rapidly improving, and prices are falling. Thanks to high-tech capitalism, the economy is booming.

This change of subject has earned some good press: News stories have quoted analysts and consumers vouching for the quality and low price of Microsoft products. “Microsoft’s Strategy Has Given Users Some Benefits,” proclaimed a New York Times headline over a laudatory Associated Press story. But whereas changing the subject usually works in politics, it’s not as effective in legal fights. The court’s proceedings keep the media spotlight on the question of monopoly.

2Big government vs. big business. A well-known law of politics says that if the debate is about you, you’ll lose. For that reason, Microsoft says the antitrust case is about governmental power. The company portrays Big Brother as the principal threat not just to Microsoft, but to free enterprise, consumer choice, and prosperity. Gates calls the choice between private and government control of software “the question at the center” of the case. Nathan Myhrvold, Microsoft’s chief technology officer, conjures up the specter of a “Federal Bureau of Operating Systems.” Conservative pundits have flocked to this argument.

DOJ antitrust chief Joel Klein offers the standard liberal rejoinder: Big business, too, can threaten consumer choice, and government is the only institution capable of stopping it. Klein has repeatedly described Microsoft as the enemy of “choice,” declaring, “No consumer should be denied the browser of their choice because Microsoft made their computer vendor an offer they couldn’t refuse.”

Klein will have a hard time persuading the public that Microsoft is coercive, because the company exerts its market-share leverage subtly: It distributes IE free, negotiates with computer manufacturers to make IE the default browser on their machines, and links Windows to software and services it wants to promote. These methods allow Microsoft to argue that computer makers can add other browsers (such as Netscape’s popular Navigator) and that users remain free to switch to them.

But Larry Lessig, the legal scholar enlisted by the court to sort out the case, is an expert on subtle methods by which software providers can steer consumer choices. He has argued that the cyberindustry’s hidden “tyranny of code” can be more pernicious than the clumsy, overreaching state. These views bode ill for Microsoft.

3Public vs. private interest. While Microsoft started with the ideological advantage of not being the government, DOJ started with the ethical advantage of not being a private interest. Microsoft appears to have evened the score by persuading the press to link DOJ, Nader, and anti-Microsoft politicians to the company’s competitors. When Sen. Orrin Hatch, R-Utah, held hearings on Microsoft’s alleged misdeeds, newspapers noted that Novell, a rival of Microsoft, is a major employer in his state. The New York Times observed that at Nader’s anti-Microsoft conference, “The panels were full of Microsoft competitors and lawyers representing them.” AP reported that Netscape was “using” the antitrust case in a marketing campaign.

Microsoft has used the image of its competitors’ political influence to portray its own lobbying as “self-defense.” Microsoft spokesmen simultaneously profess 1) “reluctance” at being forced to stoop to lobbying and 2) chagrin at having done so “belatedly.” Newspapers have bought both these spins, alternately praising and criticizing Microsoft’s virginity, but accepting it as a given. (For Slate’s view, see Jacob Weisberg’s “Dear Microsoft.”)

4Browser market vs. operating-system market. Microsoft’s critics point out that Windows has 90 percent of the OS market. Conversely, Microsoft points out that IE has less than 40 percent of the browser market, compared with Netscape’s 60 percent. On this basis, attorney Charles (Rick) Rule, who has been retained to represent Microsoft, accuses DOJ of suing “a company with a smaller share of sales in order to protect the ability of its dominant competitor to secure an exclusive.” (For Rule’s views on the case see “The Case Against the Case Against Microsoft” in Slate.) But distinguishing between the two markets undermines Microsoft’s thesis that IE and Windows are “integrated.”

5Technology vs. marketing. Microsoft says its linkage of IE to Windows yields “improved features and functionality.” DOJ says the linkage is a marketing ploy, not a technical necessity. Rule concedes that “suppliers and consumers will gravitate toward the most widely disseminated standard, regardless of whether it is technically the best.” Therefore, Microsoft owes its success to “the good fortune of being the pre-eminent operating system on IBM PCs.” Gates calls the Windows-IE marriage the latest “incremental step” in Microsoft’s “long history” of absorbing “separate offerings” (e.g., disk compression and networking) into Windows.

Critics interpret this kind of standardization and integration, for all their benefits to consumers, as triumphs of marketing, not technology. On this view, Microsoft buys out potential rivals or starves them to death by stealing their innovations and adding them to Windows. It doesn’t create breakthroughs; it absorbs them. The company’s recent buyouts of WebTV and Hotmail, the leading purveyors of TV Internet service and free e-mail, exacerbate this complaint. If DOJ persuades the court that Windows-IE integration is just one in a series of Microsoft marketing schemes, the company could lose an image war bigger than the courtroom battle.

6Platform vs. tollbooth. Much of the debate turns on a contest of metaphors. Gates calls Windows a “stable,” “open, integrated platform” that gives software and hardware innovators “the certainty they need to build products.” The metaphor emphasizes stability’s virtues (facilitating “openness” and “innovation”) over its drawbacks (stifling competition). By sundering IE from Windows, Gates suggests, the government would fracture the platform and pull down the whole house of cards. Pro-Microsoft programmers dramatized this point by staging a press conference at Nader’s forum, crediting their livelihoods and the nation’s “small business development” to the Microsoft platform. The press ate it up.

Microsoft’s enemies counter with less flattering analogies. Citing a Microsoft memo, they accuse the company of plotting to parlay its primacy into a “vig”–i.e., a bookie’s percentage–on Internet transactions. Nader and others foresee Microsoft “tollbooths” at entry ramps to the information superhighway. (For Nader’s views see “The Microsoft Menace” in Slate.) Gates replies that Windows PCs enable entrepreneurs and artists to reach audiences over the Internet, cutting out the fee-charging middlemen who control traditional media. To which critics rejoin: Why not cut out Microsoft, too?

7Desktop vs. network. An alliance of competitors–Sun, Oracle, Netscape, Novell, and IBM–is developing machines and a universal programming language (Java) based on the network, an alternative platform to the desktop. Microsoft wants to make sure that the desktop (where Windows holds sway) becomes the platform for the network, not the other way around. That’s why network advocates have accused Microsoft of tinkering with Java to frustrate collaboration between Windows-based and non-Windows-based computers. It’s also why Microsoft is marketing a browser, folding it into Windows, and battling the antitrust suit. “While the Justice Department is claiming that Windows should not include browsing capabilities,” Gates protests, “Microsoft’s competitors are busy incorporating basic operating system services … into their browsers.”

8Danger vs. dinosaur. Faced with two challenges–the antitrust case and the network-paradigm alliance–Microsoft is pitting the latter against the former. If the network paradigm is as mature and superior as proponents claim, asks Gates, how can the government deem Microsoft an entrenched monopoly? In fact, Gates argues, the network-paradigm assault makes incorporation of a browser “critical for Windows to stay competitive.” Windows must eat the browser market or be eaten.

9Technicalities vs. tone. Microsoft’s argumentativeness has disastrously overshadowed its arguments. Its lawyers have sought the removal of Lessig and the judge. They’ve derided a government brief as proof that “poorly informed lawyers have no vocation for software design.” When instructed by the judge to give computer makers an alternative to packaging IE with Windows, Microsoft made the alternatives unworkable or undesirable. This conduct has embarrassed the company’s supporters and triggered an avalanche of editorials calling Microsoft rich, ruthless, sneaky, petty, arrogant, and stubborn.

Some reports indicate that this tone-deaf performance has already irked the judge and has convinced him to enjoin Microsoft’s marketing practices on the grounds that the company can’t be trusted to regulate itself. Even if Microsoft wins the courtroom battle, it risks losing the war for consumers’ hearts and minds. The rap on nerds has always been that they’re technically brilliant but socially inept. Microsoft’s behavior has done little to prove otherwise.