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Thursday, July 05, 2001

I've got to hand it to the courts and Justice Department. After reading the entire ruling that the appeals court issued in the Microsoft monopoly case, I realize that the justices and lawyers involved have a better handle on the technology issues than we (the press and public) have been giving them credit for.

We always knew that they understood the legal issues, but time after time we heard from industry pundits and reporters that the case was too technologically complex; that the swift pace of innovation changes everything; and that the company could hide behind technology arguments time and again.

But the full text of the appeals decision shows otherwise. Not only do the justices in the appeals court understand the complex issues; so did U.S. District Judge Thomas Penfield Jackson. So it should come as no surprise that the appeals court supported the bulk of his decision about whether Microsoft is a monopoly and how the company used its monopoly power (even though the appeals court didn't support Judge Jackson's methods or conclusion that Microsoft should be broken up).

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The case could easily have turned into a protectionist case for the small software developer trying to make it against the big bad monopolist. And in fact, that's what the industry is saying it is. However, it's a lot more complicated than that.

Certainly, Microsoft has used its monopoly power to gain an advantage in the operating system market and desktop software market. It has become so expected that it is almost impossible for software companies to attract funding from venture capitalists so they can develop desktop software. Common sentiment is that if the market for the specific desktop software is big enough, Microsoft will jump in sooner or later. If Microsoft doesn't jump in, it's probably not worth doing.

But at the same time, 70,000 applications have been written to run on the Windows operating system. These applications have been made possible because the software companies developing them can write one application that will run on 90 percent of the desktops in existence, thereby making it easier to write, support and market. Without a single operating system such as Windows on which to base application software, these smaller developers would have to write multiple versions for multiple operating systems, thereby increasing their costs and headaches, which would translate into higher-end user costs.

Unless a "middleware" existed to consolidate their development efforts. Middleware is software that runs on top of an operating system. Developers can write their applications to run on middleware, which in turn might allow the software to run on almost any operating system. While many users think of Netscape Navigator as a browser, it really acted as middleware. Software developers could write their applications for Netscape instead of for Windows, and by doing so would be creating software that runs on Windows, Mac, OS/2, Linux and other operating systems.

Since most users make their buying decisions based, at least in part, on how many applications can run on their chosen system, Netscape represented a major threat to Microsoft's Windows revenue. If Netscape Navigator became the de facto standard, it would then have monopoly power instead of Microsoft. People would buy whatever operating system they wanted, as long as it ran Netscape Navigator. Microsoft's reaction to Netscape was swift and understandable.

The appeals court ruling went way beyond stating the law. It explained the concepts on which it based its decisions. Without a thorough understanding of the issues, the district court and the appeals court might have come to separate conclusions. But they agreed substantially -- because they truly understand the technology/business ramifications.