[Congressional Record Volume 144, Number 99 (Wednesday, July 22, 1998)]
[Senate]
[Pages S8776-S8777]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 LOBBING ONE MORE GRENADE AT MICROSOFT

  Mr. GORTON. Mr. President, tomorrow the Senate Judiciary Committee 
will hold yet another hearing designed solely to lob one more grenade 
at Microsoft. It is entitled ``Competition and Innovation in the 
Digital Age: Beyond the Browser Wars.''
  Just as I have said of the Justice Department's case against 
Microsoft, the Judiciary Committee's efforts to paint Microsoft in a 
negative light seems to be merely an attempt to give software companies 
that cannot compete against Microsoft on their own merits an 
opportunity to catch up. It is this practice, the practice of using the 
United States Senate and the Department of Justice as a means to help 
less successful companies compete against Microsoft, that is unfair--
not Microsoft's business practices.
  As all of my colleagues will remember, the Committee held a similar 
hearing only a few months ago. At that hearing in March, Microsoft's 
CEO, Bill Gates, patiently answered questions from committee members 
and witnesses representing his competitors for four hours. The 
questioning focused primarily on whether Microsoft has the right to 
integrate new and innovative products into its Windows operating 
system--specifically, Microsoft's Internet Explorer.
  This is precisely that issue that a gaggle of lawyers over at the 
Justice Department's Antitrust Division and a dozen state attorneys 
general are currently litigating. The DOJ and state attorneys general 
allege that Microsoft, in including its browser software in Windows 98, 
is in violation of U.S. antitrust laws.
  Only a few weeks after this case was filed, Microsoft won a major 
court victory in a related battle. On June 23, a three judge United 
States Circuit Court of Appeals panel overturned the preliminary 
injunction issued against Microsoft last December by U.S. District 
Court Judge Thomas Penfield Jackson. In my opinion, this ruling is so 
significant as to make the Department of Justice's current case against 
Microsoft even more questionable than it was at the time of filing.
  The question before the panel was whether Microsoft violated 
antitrust law and a 1995 consent decree by integrating its web browser 
into Windows 95. The panel ruled that Microsoft's actions did not 
violate the consent decree and that Microsoft should indeed be allowed 
to integrate new and improved features into Windows. Such integration, 
the judges ruled, benefits consumers.
  The judges went on to warn that the government is ill-suited to make 
technological determinations and that the dangers of doing so far 
outweigh the potential benefits that ``antitrust scholars have long 
recognized the undesirability of having courts oversee product design, 
and any dampening of technological innovation would be at cross-purpose 
with antitrust law.''
  The Judiciary Committee's hearing will apparently focus on issues 
other than the integration of browser software into Windows 98. The 
witnesses will instead give testimony, among other subjects, alleging 
that Microsoft competes unfairly in the server operating system 
market--a market in which Microsoft is one of many competitors and in 
which no one company is dominant. No monopoly here--what's the beef?
  The network server market includes competitors such as IBM, Sun 
Microsystems, Novell, Microsoft and several others. Many of these 
companies have chosen strategic business models in which they sell 
their customers not only the software that runs network servers, but 
sometimes the servers themselves, the applications that run on the 
servers, and even the workstations that sit on employees' desks. In 
such models, every piece of hardware and software is designed to work 
together, and as long as customers use only that one company's 
products, everything works fine.

  Sales volumes in the network server market are fairly low but profit 
margins are high. Once a customer decides to buy a one-company network, 
he tends to stick with that system because the cost of switching to 
something else is quite high. Thus, this business model is a good one 
that can make, and has made, some companies very successful.
  Microsoft has chosen a different business model for the network 
server market. It's model is not unfair, illegal, or anti-competitive. 
It is merely a different way of doing business. Microsoft doesn't make 
hardware or enterprise applications that run on servers. It does not 
make the workstation computers that sit on employees' desks. Microsoft 
makes network operating system called Windows NT. For a customer to use 
Windows NT on its server, it does not need to buy anything else from 
Microsoft. NT is designed to work with any manufacturer's hardware and 
support any company's software. It is a high volume, low profit margin 
model.
  It is certainly not difficult to understand why companies like 
Novell, Sun, and IBM might be concerned about competition in the server 
market. After all, they have been in this market for a long time and 
have done very well in it. Because the margins on their sales are high, 
lost sales are more damaging to them than they are to their competitors 
whose margins on each sale are much lower. But if Sun, IBM, and Novell 
continue to respond to the needs of their customers, they will continue 
to do well in the server market.
  Just as the appeals panel ruled last month on the browser issue, the 
decision on whether the business model chosen by Sun, IBM, and Novell 
or that chosen by Microsoft is a decision best made by the free market 
and the free market alone. The Department of Justice and the Senate 
Judiciary Committee have no legitimate role to play in this 
determination.
  Let me make it clear, Mr. President, that throughout this attack, 
Microsoft has gone out of its way to cooperate both with the Committee 
and with the Justice Department. Even while its reputation is being 
tarnished by these two organizations, Microsoft has provided them both 
with everything it has been asked to provide and more.
  So, I admonish my friend and colleague Senator Hatch to reciprocate. 
Given the list of witnesses scheduled to testify, however, I am afraid 
that the deck is already stacked against Microsoft. That is precisely 
why I advised

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Bill Gates to decline an invitation from the Committee to appear at the 
hearing. Once is enough, Mr. President. The Committee can drag Mr. 
Gates and his company through the mud if it so choose, but Mr. Gates 
does not have to be there to validate a travesty.

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