Late last month, the Court of Appeals for the D.C. Circuit found Microsoft guilty of violating the nation's antitrust laws. So far, Microsoft has apparently not noticed.
In an unsigned and unanimous opinion, the court held that the company had used its monopoly power to protect itself against competition. The court also rejected Microsoft's proposed rule for determining whether its bundling of Windows and Internet Explorer was illegal. Microsoft insisted that bundling was legal so long as it had some "plausible benefit," but the court held that bundling would constitute a crime if the government demonstrates it has an anticompetitive effect.
Sometime soon, the world, and even Microsoft, will recognize the significance of these two defeats. Microsoft has insisted from the start it was, in the words of CEO Steve Ballmer, "100 percent innocent" - that there was "as a matter of law, no limit" to the kind of software Microsoft could bundle into its operating system. It based its next-generation operating system, Windows XP, and its framework for Internet computing, .Net, upon the premise that its "freedom to innovate" would be guaranteed once the court of appeals "vindicated" Microsoft. Once the Redmond spin winds down, its executives will have to decide how best to follow the law.
There are some who believe Microsoft already knows how to follow the law. They insist the government's case is based on an outdated view of the company. Microsoft's strategy, these people insist, is no longer the biased game the court found illegal. It is instead a strategy that is fully consistent with the court's rule.
This view gains support from an important new book by Wall Street Journal reporter David Bank. To be published by Free Press this fall, Breaking Windows tells an extraordinary story about the struggle within Microsoft for the company's soul. It turns out that Microsoft is more complicated than the government made it seem. No doubt there is a part keen on preserving and protecting "Windows" - through techniques that the court of appeals found illegal. But there is a part as well that believes the future is best captured through a strategy of neutrality - through products built with neutral code that doesn't strive at every step to tilt the world to Windows.
We can call these the forces of darkness and light (not to bias this too much) that rage within the corporation that is Microsoft. The force of darkness is best captured in a chilling quote that Bank attributes to Bill Gates, who is reported to have "screamed" at a top lieutenant, Paul Maritz, "You're putting us on a level playing field! You're going to kill the company." Gates' strategy was instead to "tax," as Bank describes it, every Microsoft product to benefit Windows. Every implementation would make it harder for non-Microsoft products to compete.
The forces of light have a different vision of how Microsoft will best succeed. This vision is captured in one reading of the company's framework for the next generation of the Internet, .Net, which will enable a range of "Web services" that today don't really exist. They will be implemented upon a "common language runtime" that Microsoft promises it won't game. And indeed, Microsoft is backing up these promises with a commitment to submit CLR to a standards body so that anyone can build to CLR without giving control to Microsoft.
