[Congressional Record Volume 145, Number 156 (Monday, November 8, 1999)]
[Senate]
[Pages S14234-S14236]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               MICROSOFT

  Mr. CRAIG. Mr. President, I have listened to the Senator from New 
Hampshire speak in what I call the common sense of New Hampshire. I 
think all Members have been frustrated by this administration running a 
flag up the pole every morning at the White House to see which way the 
wind is blowing and then not only attempting to shift Government policy 
but oftentimes bringing Government to an entire halt until they can 
determine if the direction in which they are heading is the right 
direction.
  Another example of a misdirected effort by this administration was 
announced on Friday. I think all Members were paying attention to some 
degree and were anxious to hear how a Federal judge could decide to run 
the technological world in which we are living better than the 
marketplace itself. Sure enough, on Friday, Thomas Penfield Jackson, 
the judge down at the Justice Department who examined the ins and outs 
of Microsoft and the marketplace, has determined that Microsoft is a 
predatory monopoly.
  I am no expert in this field, and I am not going to hold myself out 
on the floor this morning to be so. I ask unanimous consent to have 
printed in the Record two editorials.

[[Page S14235]]

  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                     U.S. Department of Microsoft?

       At its highest levels, the educational system is still 
     capable of giving its money's worth, and taxpayers certainly 
     spent enough to educate Thomas Penfield Jackson on 
     Microsoft's struggle to manage what it pleased the judge 
     Friday to call the company's ``monopoly'' in computer 
     operating systems. We guess now the government is going to 
     have to run Microsoft.
       We also see the failure of Microsoft's strategy, which was 
     to deny the meaning of its own actions, lest those actions 
     retroactively be found illegal because the court pins the 
     label ``monopoly'' on it. That was unfortunate. Microsoft had 
     a strong case to make that it had behaved in the only way any 
     rational competitor could have.
       Microsoft should have argued that we have a monopoly 
     because our customers want us to have one. There is a great 
     deal more software in the world than there would otherwise 
     be, because software designers can invest in creating 
     products knowing there is an installed base of compatible 
     operating systems that won't soon be displaced. And consumers 
     know that they can lay out a thousand bucks or more for a PC 
     without taking a Betamax-vs.-VHS gamble that their investment 
     will be rendered obsolete.
       What benefits our consumers is a barrier to our 
     competitors, but as Judge Jackson points out, our real 
     competitor is not ``another product within the same software 
     category, but rather a technological advance that renders the 
     boundaries defining the category obsolete.'' What the judge 
     calls our attempts to maintain our ``applications barrier is 
     entry'' is simply our way of making sure our investment in 
     Windows--and our customers' investment--remains viable in the 
     face of these technological advances. Take our behavior 
     toward Netscape. Browsing the web has become the central 
     purpose of the PC for millions of users. If we had not 
     aggressively promoted our browser, it would have been 
     tantamount to helping Netscape cannibalize our business, 
     using our own platform to render us obsolete while we stood 
     by watching.
       If Microsoft cannot act rationally in its own interest, the 
     alternative is a government administrator to take over the 
     business and run it for the benefit of Microsoft's 
     competitors. Outside a Nader thought-bubble, there can't be 
     many people who don't see this cure as worse than the 
     disease. Northwest University Law Professor Larry Downes, 
     writing in USA Today, notes a ``precedent for a remedy of 
     doing nothing; that is, for finding Microsoft guilty but 
     recognizing that there was no court-administered 
     solution that could solve the problem any better than 
     letting the market try to work it out on its own.''
       What makes this less than academic is that, even without 
     the government turning Microsoft into a public utility, the 
     paradigm shift is happening and everybody in the business 
     knows it. A host of new developments has already shrunk 
     Microsoft's control over cyberspace, and events are on the 
     way to delivering new forms of web computing that won't even 
     require Windows.
       Judge Jackson has deferred the question of whether 
     Microsoft violated the law for a later ruling, but he hasn't 
     left much to the imagination. If he takes his arguments and 
     the incoherent assumptions of antitrust seriously, the only 
     remedy is to turn Windows into a regulated utility, possibly 
     breaking the company up.
       No wonder he has repeatedly hinted he would be relieved if 
     the parties would settle. An appeals court would likely 
     overturn any draconian verdict against Microsoft--if a post-
     Clinton Justice Department hadn't already settled the case. 
     Microsoft has mounted such a lame effort partly because it's 
     relying on the federal circuit court of appeals. On Friday, 
     in a significant ruling related to a private antitrust 
     lawsuit against Intel, that court noted the ``Sherman act 
     does not convert all harsh commercial actions into antitrust 
     violations.''
       By the time Microsoft reaches the appellate level, the 
     computing world will have moved on and historians will have 
     to be summoned to remind us what the argument was all about. 
     Judge Jackson will have sat through the antitrust ``case of 
     the century'' only to see it waddle off and expire with a 
     whimper behind some shrub. He can't have that, so he's 
     banging the pots and pans and trying to scare Bill Gates into 
     settling. How much more splendid to be this generation's 
     Judge Greene, tinkering with future releases of Windows the 
     way Judge Green spent 10 years tinkering with AT&T and the 
     baby bells.
       But let's get to the real bottom line. Washington's crusade 
     against Microsoft has fulfilled its purpose, serving as a 
     great lever to pry open the wallets of Silicon Valley. Where 
     three years ago the technology plutocrats spent their surplus 
     income on racing yachts and Ferraris and charity, now they 
     patriotically send donations to Washington to support the 
     fixer class and its retinue in the style to which it would 
     like to become accustomed. Steve Case of AOL likes to say the 
     future of technology will be decided in the political arena 
     rather than the marketplace. Be careful what you wish for.
                                  ____


                          Punsihing Microsoft

                          (By Robert A. Levy)

       Here's the lesson that high-tech companies can glean from 
     Judge Thomas Penfield Jackson's findings in the Microsoft 
     case: If you're sufficiently ambitious, competent, and hard-
     working; if you're willing to risk your time and fortune; if 
     you succeed at rising above your competition by serving 
     customers with better products; then watch out, because our 
     government will come down on your neck with the force and 
     effect of a guillotine. Judge Jackson's knee-jerk recitation 
     of the Justice Department's line is a mockery of objectivity, 
     scornful of the facts, and congenial only to those who prefer 
     a sterile marketplace in which vigorous competition becomes 
     legally actionable.
       Let's start with the judge's big picture: an industry 
     crippled because Microsoft's competitors are unable to 
     innovate. Yet how to explain Netscape's 410 billion price 
     tag, or continued market leadership by Microsoft arch-rivals 
     Oracle, Intuit, AOL, Sun Microsystems, and Real-Networks? How 
     to explain Apple's growth in both sales and profits? Indeed, 
     if Microsoft's ``prodigious market power'' and ``immense 
     profits'' have been used to stifle innovation, then how to 
     explain the incredible success of Linux, which now runs more 
     Web sites than any other server operating system?
       In an unguarded moment, Sun's CEO, Scott McNealy, recently 
     crowed that ``Windows is dead'' when it comes to new software 
     applications, Mr. McNealy may be right. Despite Judge 
     Jackson's snapshot view of the software market, the Internet 
     has profoundly and permanently altered the dynamics. Will 
     Microsoft lose out to consumer electronics products? Mr. 
     McNealy doesn't know, and neither does Judge Jackson. But 
     those products are out there, they're selling well, and they 
     are competition.
       What about Web-based software--probably the most formidable 
     threat to Microsoft's dominance? Instead of buying and 
     selling applications like word processors and speadsheets, 
     users can rent the same functions from Internet services--or 
     get them free if they sit through advertising.
       The only essential user program is a Web browser. As the 
     Wall Street Journal put it: ``If users don't need PCs with 
     Microsoft's Windows operating system or Intel chips--the 
     vaunted market power of the duo called Wintel doesn't seem so 
     unshakable.''
       The important points is this: Many desktop machines that 
     access Web-based servers are ``Windows-less'' products, and 
     Microsoft's major OEM customers are climbing on the band 
     wagon. Gateway is building a line with no Microsoft software 
     at all, and may jointly market it with AOL, which is a major 
     Gateway investor. Dell also plans to bring out a line of 
     Internet computers, some without Microsoft software. 
     Compaq's chief executive observes that its new generation 
     of products will ``redefine Internet access.''
       Another industry executive stated that ``the Internet gives 
     people a platform to do most of the things they need to do on 
     a PC without a cumbersome and expensive operating system.''
       Judge Jackson, infinitely wiser about such matters now that 
     he knows how to use his computer, has an astonishing two fold 
     response to the emergence of Web-based servers. First, he 
     contends that ``Windows has retarded, and perhaps altogether 
     extinguished'' the server threat. That contention has a 
     surreal quality: Judge Jackson describes an event that never 
     actually happened but, if it had happened, it would have 
     crippled competition. The same dialetic creeps into his 
     anecdotal chronicle of Microsoft's persecution of Intel, 
     Apple, and Compaq, as well as Microsoft's supposed market-
     splitting with Netscape. ``OK, so this thing Microsoft tried 
     to do never did materialize. The other guy never agreed to it 
     and ultimately he did what he wanted. But what a hobbling 
     impact on innovation if things had gone otherwise.'' Judge 
     Jackson's second justification for discounting Web-based 
     servers is even stranger. He claims that viable competition 
     from server-based applications ``is not imminent for at least 
     the next few years.'' His projection is surely too 
     conservative.
       Venture capitalists report that they haven't seen a 
     business plan for conventional packaged software in more than 
     six months. Mr. McNealy predicts that fewer than 50 percent 
     of the devices accessing the Internet will be Windows-
     equipped PCs by the year 2002, just a little over two years 
     from now. Mr. McNealy has put Sun Micro systems' money where 
     his mouth is--acquiring Star Division so he can convert its 
     Star Office product into a free, Internet-based service that 
     can be run directly by any user with any Web browser.
       But more important, Judge Jackson's ``not imminent for a 
     few years'' forecast has to be placed in context. He plans on 
     issuing his conclusions of law in this case early next year. 
     Then a hearing on remedies in the spring, with a possible 
     summer decision. Then we can expect a year or so before the 
     United States Court of Appeals finishes its review. Then 
     another year for the Supreme Court's deliberations. Finally, 
     even if Microsoft loses at each stage and remedies are 
     imposed, they will not be effective overnight. In other 
     words, the market will certainly have obviated any remedies 
     before they can have an impact.
       Meanwhile, Microsoft behaves not like a monopolist but like 
     a company whose every survival is at stake. Its prices are 
     down and its technology is struggling to keep pace with an 
     explosion of fresh software products. Facing competition from 
     new operating systems, consumer electronics, and Web-based

[[Page S14236]]

     servers, Microsoft now operates in a world where anyone 
     running a browser will soon have the same capabilities as 
     today's Window users. That is why the government should keep 
     it's hands off.
  Mr. CRAIG. Mr. President, one editorial is by Robert Levy, a senior 
fellow of constitutional studies at the CATO Institute. He starts his 
op-ed piece:

       Here's the lesson that high-tech companies can glean from 
     Judge Thomas Penfield Jackson's findings in the Microsoft 
     case: If you're sufficiently ambitious, competent, and hard-
     working; if you're willing to risk your time and fortune; if 
     you succeed at rising above your competition by serving 
     customers with better products; then watch out, because our 
     government will come down on your neck with the force and 
     effect of a guillotine.

  The editorial in the Wall Street Journal probably sums it up best of 
all. There is no question my colleagues from the other side of the 
aisle--or should I say their political machinery as expressed by--I 
don't want to call them outbursts, but certainly the expressions of our 
Attorney General, Janet Reno, are best summed up when they discussed 
the Microsoft case this morning in the Wall Street Journal. Here is 
their concluding paragraph:

       But let's get to the real bottom line. Washington's crusade 
     against Microsoft has fulfilled its purpose, serving as a 
     great lever to pry open the wallets of the Silicon Valley. 
     Where three years ago the technological plutocrats spent 
     their surplus income on racing yachts and Ferraris and 
     charity, now they patriotically send donations to Washington 
     to support the fixer class and its retinue in the style to 
     which it would like to become accustomed.
  Steve Case of AOL, who happens to be on the other side of this issue, 
recognizes the problem, though. He says the future of technology will 
be decided in the political arena rather than the marketplace. My guess 
is, if that is true, your computers will not be working as well 
tomorrow as they are working today.
  I came to the floor this morning to join with my colleague from 
Wyoming, not to discuss the Microsoft case; that is going to get played 
out over time, and I think we are going to have a Federal judge who 
will try to run the technology business of this country. Maybe we need 
to decide to start a new agency of our Federal Government called U.S. 
Department of Microsoft. If it is as profitable as Microsoft, maybe we 
can make a lot more money without taxing the American public to allow 
our Democrat colleagues on the other side of the aisle to spend it.
  Certainly Microsoft is now making as much as $1 billion a month in 
cash to spend. It is obvious somebody else wants their hands on that or 
wants to break up that very profitable business.

                          ____________________