[Congressional Record Volume 141, Number 111 (Tuesday, July 11, 1995)]
[Extensions of Remarks]
[Pages E1407-E1408]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


  THE SOFTWARE INDUSTRY IS FACING INCREASING GOVERNMENT OVERSIGHT AND 
                               REGULATION

                                 ______


                            HON. RICK WHITE

                             of washington

                    in the house of representatives

                         Tuesday, July 11, 1995
  Mr. WHITE. Mr. Speaker, later this month the House will take up 
historic telecommunications reform legislation to deregulate and 
introduce competition into areas that were previously monopolies by 
government franchise. I can assure my colleagues that the Commerce 
Committee, under the able leadership of Chairman Bliley and 
Subcommittee Chairman Fields, also has been on guard to ensure that, as 
we deregulate the telecommunications industry, we do not inadvertently 
begin regulating the computer and information services industries.
  I am confident that this Congress would never create a ``Federal 
Computer Commission.'' The computer industry is a model of how a 
competitive market fosters economic growth. Moreover, it illustrates 
how technological advance by one company can create enormous economic 
opportunities for many others in the marketplace. The most recent 
example, I am proud to note, is the development by Microsoft of its 
windows 95 personal computer operating system software and its new 
online information service, The Microsoft Network. As the Wall Street 
Journal recently noted, much of the high technology sector--and the 
market generally--anxiously awaits the timely and successful launch of 
windows 95 and the Microsoft Network on August 24.
  Given all this, I thought my colleagues might be interested in the 
views of several commentators. Many of them have raised questions about 
the Justice Department's investigation of Microsoft's decision to 
include a feature in windows 95 that will make it easier for customers 
to subscribe to the Microsoft Network if they choose to do so. These 
commentators wonder how such regulatory intervention in the computer 
industry benefits users, competition or the country generally.
  I would ask that these articles be included in the Record.
             [From the Wall Street Journal, June 19, 1995]

          Successful Launch Would Be a Boon To Dozens of Firms

                            (By Molly Baker)

       Microsoft's Windows 95 may create a tidal wave in the 
     technology and financial markets, but investors looking to 
     profit by it should search among the ripples.
       Certainly no one should underestimate the significance of 
     the new operating system, scheduled to be shipped on Aug. 24, 
     less than 10 weeks from now.
       ``This is a broad infrastructure change that will have 
     ramifications not seen before,'' proclaims Chris Galvin, a 
     software analyst with Hambrecht & Quist. ``This is not your 
     normal upgrade cycle; it is a very significant event.''
       Obviously, Microsoft has the most to gain or lose from 
     Windows 95 and its price already reflects that. But changes 
     the system will bring--providing, of course, that it is 
     successful--will be a boon to dozens of other companies.


                             replacing pcs

       Consider, for instance, that the new operating system 
     probably will make obsolete many of the personal computers 
     sold in the past decade. The sheer number of people who will 
     be seeking to replace or upgrade their existing PCs suggests 
     that computer retailers like CompUSA will be mobbed.
       ``With its ease of use, [Windows 95] will also draw new 
     users to computers for the first time. It's likely to be one 
     incredible Christmas season,'' says Shelton Swei, a 
     technology analyst and portfolio manager at Fred Alger 
     Management.
       ``Because CompUSA is more on the consumer side, they will 
     benefit from the consumers' quick adoption rate,'' says Mr. 
     Swei. ``They'll get traffic from people in the stores getting 
     the upgrade and those people just might pick up a game or two 
     at the same time.''
       Wholesale distributors such as Tech Data and Merisel can 
     also expect burgeoning orders for both hardware and software. 
     They are two of the largest middlemen that put computer 
     equipment and supplies from the major manufacturers on the 
     shelves of retailers.
                           utilities programs

       Along with Windows 95, consumers will also be snapping up 
     new utilities programs, such as virus protection and hard-
     drive backup tools, as the old set won't work with Windows 
     95. Many money managers are betting on Symantec, which 
     controls about 75% of the utilities market.
       ``Our logic with Symantec is real simple. Once [Windows 95] 
     gets released, the utilities upgrades will be pervasive, just 
     like when Windows 3.0 was introduced,'' says Edward Antoian, 
     a portfolio manager with Philadelphia-based Delaware 
     Management.
       Then there are the memory makers. Windows 95 will gobble up 
     memory, requiring at least eight megabytes of random-access 
     memory, or RAM, to run its various tools. Most consumers have 
     been buying computers with just four megabytes of RAM and 
     will be turning to the memory providers for upgrades.
       ``I think eight megabytes of RAM will be underpowered, and 
     most are going to be looking for 16 megabytes,'' predicts 
     Charles F. Boucher, a semiconductor analyst with Hambrecht & 
     Quist.
       Although the big RAM makers such as Micron and Texas 
     Instruments are the obvious names, smaller companies could 
     profit from the memory demand.
       ``When it comes to Windows 95, anyone selling anything 
     remotely related to memory will benefit--because you'll need 
     it,'' comments Lise Buyer, an analyst with T. Rowe Price's 
     Science and Technology Fund.
       Integrated Silicon Solutions, which makes the higher 
     performance SRAM memory circuits, is already producing at 
     capacity and orders are expected to increase. The Sunnyvale, 
     Calif., company's shares, which rose \1/4\ to 51 Friday on 
     the Nasdaq Stock Market, have soared from an initial offering 
     price of 13 in February.
       Another 1995 IPO that might ride Windows 95 to bigger gains 
     is Oak Technology, a maker of semiconductors and software 
     specifically for multimedia applications. Multimedia is 
     supposed to be one of Windows 95's especially strong suits. 
     Oak's stock has been rising in tandem with consumer demand 
     for CD-ROM-equipped computers. Shares have more than doubled 
     since Oak's first-quarter IPO at 14 a share to Friday's close 
     of 34\1/4\, up 3\1/4\.
       Once armed with the latest turbocharged computers and the 
     new operating system, consumers will turn to software 
     developers to write more advanced multimedia titles to take 
     advantage of that power. To hear and see all of the bells and 
     whistles of the new programs, computer makers and consumers 
     will be loading their PCs with all kinds of graphic 
     accelerator chips and boards.
                             soaring shares

       A number of smaller companies specialize in the graphic 
     chips market, and their stocks have been soaring this year. 
     S3 has more than doubled this year, closing Friday at 34\5/
     8\, down 1. Trident Microsystems has gained 64% this year to 
     close at $19.25 a share on Friday, up \1/2\, while Chips & 
     Technologies, which focuses on the portable PC market, has 
     gained 55% since January to end last week at $11.125, up 1.
       S3 got an added boost last week when Compaq Computer said 
     it would use an S3-produced multimedia chip package in one of 
     its PC lines. Following the announcement, S3 said it was 
     comfortable with analysts' sales estimates for the year of 
     $300 million, compared with $140 million in 1994.
       The second quarter played host to two hot IPOs of companies 
     which make boards combining the various graphics and 
     multimedia chips. Diamond Multimedia Systems and Number Nine 
     Visual Technology should both get a boost from consumers who 
     want to upgrade their capabilities without buying a new 
     computer.
       In addition to selling the boards, Number Nine also makes 
     its own high-end 128-bit graphics card--enabling computing to 
     run at near Mach speeds compared with the current 16-bit 
     standard and Windows 95's breakthrough 32-bit capabilities.

[[Page E 1408]]

       ``It's a small market right now, but that's where a lot of 
     the growth will be coming from in the next few years,'' says 
     Brad Hoopman, a technology analyst with Philadelphia-based 
     PNC Small Cap Growth Fund.
       With increased memory and the speed of the new system, more 
     consumers will be turning to the Internet for entertainment 
     and information. They might need high-performance modems made 
     by Microcom and U.S. Robotics.
       One warning from the analysts: Software makers that aren't 
     ready for Windows 95 when it arrives could be in for some 
     hard times. They recommend evaluating software stocks in 
     light of their ability to offer Windows 95 products.
       ``Clearly it's something that has to be thought of in the 
     overall investment equation,'' advises Fred Alger's Mr. Swei. 
     ``When considering the technology stocks, you've got to think 
     about whether the product can compete or will it just become 
     irrelevant'' in the post-Windows 95 world.
              [From the Washington Times, April 21, 1995]

        Microsoft Deserves Reversal on Merits, Judge's Goofiness

       There is no polite way to put this. The Sporkin-Microsoft 
     antitrust case that goes before a U.S. Court of Appeals on 
     Monday is just about the goofiest, weirdest, most bizarre 
     case of its kind. Ever. Here are the basics of the case:
       In the 1980s, Microsoft officials bet the ranch that they 
     could build an operating system that would serve as a 
     foundation, or platform, for most or all of the software 
     applications that run on personal computers. They won--big.
       Competition, naturally didn't like this much. Four years 
     ago, they complained to the Federal Trade Commission and then 
     the Justice Department. They said (anonymously) that SYS-DOS 
     and Windows had been so successful that Microsoft's operating 
     systems had become a monopoly. Which is true.
       First the FTC and then Justice decided that, in fact, 
     Microsoft did have a monopoly. Never mind that Microsoft had 
     mostly guessed right and that thousands of independent 
     software developers were exceedingly delighted that they had. 
     The government decided to pursue an antitrust case against 
     Microsoft.
       Four years and millions of taxpayer dollars later, Justice 
     decided that, well, maybe Microsoft did have a monopoly and 
     their competitors didn't much like it. But consumers were 
     happy--they were getting thousands of new software 
     applications at
      lower prices--and there wasn't much of an antitrust case 
     after all.
       So Justice and Microsoft officials negotiated a deal, a 
     consent decree that essentially ordered Microsoft to change 
     the way it licensed its operating system to others. 
     Everyone--except Apple Computer Inc., and other direct 
     competitors--seemed to be happy.
       In the end, the Justice Department conducted more than 100 
     interviews at about 80 companies, reviewed more than 2 
     million pages of documents, and devoted more than 20,000 
     paralegal and economist hours on the case. Kind of takes your 
     breath away.
       But this story, as bad as it seems, did not end there. 
     Instead, Stanley Sporkin, the federal district judge assigned 
     to review the consent decree, read a book called ``Hard 
     Drive'' during his vacation and created a whole bunch of new 
     kooky things for everyone to look at and basically threw the 
     case out and told them to start over.
       Judge Sporkin, for instance didn't like something called 
     ``vaporware,'' and was mad that Justice didn't pursue this. 
     And what, exactly is vaporware? Glad you asked.
    
    
    
    
       When a company like Microsoft is developing a new operating 
     system, it announces its future plans to market such a new 
     system. Mostly, it lets computer buyers, dealers, and 
     software makers (or even consumers) know that something new 
     may be on the horizon.
       But Judge Sprokin said, no, this ``vaporware'' (as in, it 
     doesn't exist yet and may never actually exist) is nothing 
     more than a sinister plot by Microsoft to keep people from 
     buying similar competing products before its own product 
     emerges from the factory.
       Let's take the judge's reasoning out to its conclusion. 
     Instead of telling people (beforehand) what Windows 95 will 
     look like when it comes out, Judge Sporkin wants Microsoft to 
     just drop the program in people's laps one day. Sure, that 
     makes a lot of sense.
       In addition, Judge Sporkin apparently entertained some 
     rather unusual ``ex parte'' communications with quite 
     interested third parties while he was deliberating the case.
       For instance, according to Microsoft's Appeals Court brief, 
     Apple sent a letter and five affidavits accusing Microsoft of 
     various actions unrelated to the Justice case directly to 
     Judge Sporkin's chambers. The other side didn't find out 
     until later.
       And a software industry commentator faxed an accusatory 
     letter directly to the judge's chambers opposing the consent 
     decree, according to Microsoft's brief. Judge Sporkin didn't 
     bother to tell anyone about this, which only later emerged as 
     court documents became available.
       Just think of the possibilities if all judges had faxes in 
     their chambers to receive such ex parte communications. Have 
     a problem with the way the O.J. Simpson case is going? Just 
     fax in your comments to Judge Lance Ito's chambers.
       Reading through the transcript of the Sporkin proceedings 
     is a journey through fantasyland. At
      one point, he said he was raising issues unrelated to the 
     case before him because ``I read a book once that raised 
     all these issues, and that's why I raised them.''
       At another point, he urged Microsoft legal counsel to read 
     ``Hard Drive'' so everyone would be on the ``same page'' and 
     constantly referred to things he'd clearly read from a stack 
     of newspaper clips in his chambers.
       And at yet another point, Judge Sporkin said he was 
     concerned about the ``schnook consumer'' who might be 
     thinking of buying ``Turbo Charge.'' Never mind that cars are 
     turbo-charged and that computer run a programming language 
     called TurboBASIC.
       Make no mistake about any of this, Microsoft is clearly an 
     aggressive--maybe even ruthless--company. It offers deals 
     that can't be refused to computer hardware manufacturers so 
     they will install Microsoft operating system in their 
     computers.
       But none of this is illegal. Microsoft cornered the market 
     on personal computer operating systems by offering very good 
     products at very good prices. Simple as that.
       And no amount of equivocating by anyone--including a judge 
     who wants to be the mediator of the computer industry for 
     perhaps the next 10 to 20 years--is going to change that 
     fact.
       Even if Microsoft CEO Bill Gates and his good friend 
     President Clinton, did cut their own side deal on a golf 
     course somewhere to get Justice to back down in the antitrust 
     case, it makes no difference.
       The case against Microsoft was a joke to begin with, and it 
     only got worse with the passage of time. ``Schnook 
     consumers'' are getting murdered by this entire mess.
       If there is any intelligent life left in the federal 
     judicial system around here, the U.S. Court of Appeals should 
     review the case immediately, order another federal district 
     judge to enter the consent decree, and let the computer 
     industry get on with its life.
       Oh, and while it's at it, the appeals court might want to 
     tell Judge Sporkin to turn off the fax machine in his 
     chambers and avoid bookstores on his next vacation.
     

                          ____________________