Industry not keen on government regulation

Love or hate Microsoft, one consistent theme is emerging as speculation runs rampant about possible penalties in its antitrust suit: Intrusive government regulation of the computer industry is not welcome.

From Microsoft's most dedicated detractors to those who don't think any penalties are needed, many industry associations, analysts and end users say heavy-handed government regulation of Microsoft as part of any possible penalty would set a bad precedent in the industry.

"I loathe Microsoft, but government intervention is permanent," says Eric Raymond, president of the Open Source Initiative, a Linux support association. "I would rather deal with Microsoft [as it is] than live with government meddling in the industry."

"There is a fear that once the government gets into the industry, they will destroy it," says Rob Enderle, an analyst with Giga Information Group in Santa Clara.

"There is an increasing concern that there will be more lawyers than programmers in this industry," says Jonathan Zuck, president of the Association of Competitive Technology, a Washington, D.C., group that opposes government regulation. "The government's findings represent a clear signal that it is pursuing a course of regulatory intervention into the IT industry."

Zuck says Microsoft's competitors are partly to blame and should have been careful about what they wished for. "Microsoft's competitors have been doing a rain dance for three years. Now after feeling a few drops of rain, they realize they don't have an umbrella and they are saying, 'Oh, no.' "

Government regulation of any penalties Microsoft may receive seems probable because the company has flouted court-imposed mandates before. In 1994, Microsoft was ordered to unbundle Windows 95 and Internet Explorer. Left to its own interpretation of the order, Microsoft gave hardware OEMs the choice of installing an old or inferior version of Windows. The government finally forced Microsoft to offer the products separately. Microsoft eventually won the right to bundle the two products in Windows 98.

The issue took nearly four years to resolve, an eternity in the computer industry.

But that doesn't mean observers think Microsoft should avoid penalty for behavior detailed in the findings of fact handed down by U.S. District Court Judge Thomas Penfield Jackson. Those findings say Microsoft has a monopoly in the operating system market and that the company used its power to stifle competition and innovation. It will be at least another two months until Jackson determines if Microsoft actually broke any laws.

Industry sentiment, however, is that if punishment is warranted it should be done with careful consideration.The concern is not for Microsoft; it is for the industry in general.

"Having the government decide what can go in an operating system is not in anyone's best interest," says Ken Wasch, president of the Software and Information Industry Association, a 1,400-member group that advocates antitrust law and represents software companies and content providers. "It is possible to have conduct remedies that prevent Microsoft from leveraging the operating system, but someone has to monitor and enforce that, and it is difficult to do."

Wasch thinks the solution should be self-executing so enforcement of any penalties doesn't turn into a form of regulation that would slow the "rapid pace of technical change in the software industry."

If there is a remedy regulating Microsoft's bundling of technology with the operating system, the result would definitely restrict Microsoft from leveraging its power in the operating system market. The judicial process for approving any bundling request could be painfully slow. A simple innovation akin to bundling a TCP/IP stack with an operating system could take years to approve.

"The most effective approach is for the court to adopt a remedy that creates a new relationship between the dominant OS provider and the rest of the industry, while eliminating the need for the government to remain as a watchdog of software business practices," Wasch says.

Government regulation in the historic breakup of AT&T became so problematic that it eventually had to be corrected with the Telecommunications Act of 1996.

"IT doesn't want to see Microsoft [become] harder to deal with and less responsive because of heavy government regulation," says Giga Group's Enderle. "IT doesn't like lots of changes, they like a high degree of stability. The concern is if the government can touch the plumbing they make it worse, not better."

Others are beginning to look beyond the most immediate effects on Microsoft.

"Reality is now hitting the industry as it looks at the harshness of Jackson's findings," says Dwight Davis, an analyst with Summit Strategies in Kirkland, Wash. "They're realizing that if eventually there is government scrutiny, it may not be good for the industry as a whole in the long term."