Preventing a U.S. Dept. of Software

May 18, 2000|By Jonathan Zuck

WASHINGTON -- The government's breakup proposal for Microsoft amounts to creating an unprecedented regulated information technology sector with severe implications across a very healthy and competitive industry.

The areas in which we would find government involvement in the industry where none previously existed include government-designed software, erosion of intellectual property protection, price controls, product marketing restrictions and managed competition.

The U.S. Justice Department and 17 states have urged U.S. District Court Judge Thomas Penfield Jackson to create two companies out of Microsoft. One would market and control the Windows operating system. The other would control everything else in the Microsoft inventory, including Web browsers and office software.

The government's overly broad reference to "middleware" restrictions in a personal computer's operating system means the government would be involved in ongoing monitoring and approval of all improvements to that system.

Under the government's definition, Windows itself would have constituted "middleware" and may never have been developed. What would be considered technological evolution by the industry would be considered "binding" by the government.

Much of what the government wants to rip out of Windows are the tools software developers are using. Companies have committed time and capital to these technologies, and the government is threatening thousands of independent software developers by removing them.

The government's proposal requires the publication of the substance of any technical meeting between Microsoft and a partner. The selective protection of intellectual property and the disregard for the competitive effect of these restrictions represents bad news in an industry made up almost entirely of intellectual property.

One implication is that any discussion between Microsoft and another company will have to be made public. What is to stop this disclosure process from becoming a vehicle to learn about the technology of the partner as well as that of Microsoft?

Any small businesses with limited budgets for attorney's fees could fall prey to bigger competitors who could use this decree to steal their ideas. This erosion of trade secret protection will decrease the incentive for Microsoft to share any technology specifications with other companies and inhibit their ability to create a compatible innovation that would have benefited consumers.

In the government's proposal, pricing strategies are specifically limited. Computer manufacturers and partners are restricted from negotiating superior pricing based on cross-promotions, technology implementations and support. Pricing experimentation would be replaced with price controls.

The government's proposal suggests that there is some sort of computable relationship between lines of code and price.

Could there be any other scenario that better underscores the lack of the government's understanding of the technology sector? The notion that software could and should be priced based on the number of compiled bytes creates perverse incentives for bloated code or other unforeseen circumstances.

The government's proposal places broad restrictions on Microsoft's ability to compete. What constitutes "unfair" competition will be a question left for the courts.

The imposition of these broad restrictions, including forcing Microsoft to retrofit its products and requiring the company to be available at any time to representatives of the government, effectively pulls it out of the forward-looking marketplace for a significant period. It has never been suggested that Microsoft isn't a competitor and that it doesn't drive innovation in the markets in which it competes.

The net effect of removing Microsoft from the forward movement of the tech sector will be to reduce competition rather than increase it.

The U.S. Department of Software would have an acronym -- (DOS) -- that portends a future without an ability to keep pace with a rapidly changing tech marketplace. Is this what we want for the industry's future?

Jonathan Zuck, a professional software developer and IT executive, is president of the Association for Competitive Technology, an IT industry group, and founder of Americans for Technology Leadership, a consumer's tech group.

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