Windows, Gates and closed shops

The computer industry's future hinges on the outcome of Microsoft's spat with a judge.
THE JUDGE peered down over his right shoulder at the young man testifying on the witness stand last week. He did not look pleased. The young man, without saying it in so many words, was calling him a superannuated old fool.

The judge was Thomas Penfield Jackson, an imposing, white-haired veteran of the American court in Washington DC. The young man was David Cole, a vice president of Microsoft Corporation, the world-dominant computer software maker. Cole - round-faced, in his mid-thirties, running to portliness - has more money than the judge will earn in a lifetime. Bill Gates, the chairman of Microsoft and the world's richest man, rewards his generals well; $10m would be a conservative estimate of Cole's worth.

But demeanour was not caused by envy - of his youth or of his riches. They were sitting in the same court because Cole's company was challenging not only the legality but the intelligence, the clarity, the actual grammar of a court order Judge Jackson had issued on 11 December last year. The order, based on a finding that Microsoft had established a dangerously monopolistic control over the computer software business, was for the company to delete a programme from Windows 95, the operating system that comes pre- installed in 90 per cent of personal computers. The idea was to prevent unfair competition.

Cole's highly technical testimony was intended to show that Judge Jackson and the US Department of Justice, which backs the judge, lack the sophisticated understanding necessary to speak coherently on the subject of software design. The judge's order was gibberish and, it followed, unworkable in practice. According to Microsoft, to delete the programme in question would risk destroying the entire Windows 95 system, and new PCs on the market would become inoperable. This much, Cole said, was "absolutely clear". For that reason, Microsoft basically ignored the court order.

Judge Jackson listened to this impudence with growing restlessness until he could contain himself no longer. He asked Cole sharply if it seemed "absolutely clear" to him that the bench had in fact ordered Microsoft to distribute a product that would not work. Cole was taken aback, and looked confused.

Judge Jackson repeated the question. "It seemed clear to you that you received an order from me to sell a product that you knew would not work?"

Cole stared the judge in the eye. "In plain English," he replied, "yes."

To grasp the extent of Microsoft's commercial might, to have some sense of why Bill Gates is worth $40bn, imagine a computer-operating system to be the engine of a car. Then imagine that, with a few quirky exceptions such as a Morgan or a Ferrari, every car had the same engine. In the real- life computer world, that company is Microsoft and the engine is called Windows 95. That means that the manufacturers of the 150 million PCs run by Windows systems have been virtually turned into resellers of Microsoft goods. All they contribute is the packaging.

The Internet Explorer programme Judge Jackson ordered to be removed from Windows 95 to give some of Microsoft's aspirant competitors a chance to stay in the chase, is like a car's tyres. It is the software component that makes it possible to travel in the World Wide Web - known as a browser.

Microsoft, so clever and so big, failed to realise at first that there was a lot more to a PC than a glorified typewriter-cum-calculator. Netscape, by contrast, quickly latched on to the vast commercial potential of the Internet. Three years ago, Netscape's Navigator was virtually unchallenged as the net world's favourite browser.

Microsoft came up with its Internet Explorer only in the middle of 1995, and immediately made it standard with Windows 95. Suddenly, the buyer of a PC acquired not only a Microsoft engine but the Microsoft tyres too. The Department of Justice in America decided to draw a line, and last October Janet Reno, the Attorney General, ruled that by obliging computer manufacturers to include Internet Explorer with Windows 95, Microsoft had violated a 1994 decree barring the company from bundling any new product into its operating systems.

Joel Klein, one of Ms Reno's top lieutenants in the justice department, described Microsoft as "the enemy of choice". On 11 December Judge Jackson backed the government's position. This week he is expected to decide whether to hold Microsoft in contempt of court for violating his order. In March the case goes to the federal court of appeals.

But there is much more at stake than the matter of an Internet browser. Bill Gates's plans go far beyond swallowing the Netscape minnow and entrenching his dominance over the PC software market. The outcome of the current legal dispute will set a precedent that may determine whether his dreams of global expansion can be fulfilled. If he loses, the government and the courts will be emboldened to strike against Microsoft again. If he wins, and defeats the government of the most powerful nation on earth, his ambition will know no bounds.

The next frontier he seeks to conquer is television. Last year Microsoft bought a $1bn, 10 per cent share in Comcast, one of America's biggest cable TV companies; and $452m purchased outright Web TV, a service that provides Internet access via a television screen.

The beauty of the enterprise is that whereas only 40 per cent of Americans own PCs - a figure that appears unlikely to grow in the short term - everyone owns a television. Cable TV, furthermore, provides a web connection so fast that once it takes hold as the dominant medium of Internet access, web-surfers will look back and wonder how they ever endured the tedium of waiting for today's telephone line connection to kick in.

Having secured the engine and the tyre market, Bill Gates now wants control of the roads. Once the goal has been achieved, he will be able to charge tolls - the cable subscription rates - and to set up roadside shopping malls. Already he has created his own Microsoft travel agency, Expedia, which allows on-line purchases of holidays by credit card. After that, who knows? Retailing? Banking?

Clearly, something has to give. Either some genius - another young Bill Gates - has to come up with a new idea so breathtaking that it smashes what seems to be a permanent stranglehold on the computer industry, as Microsoft did to IBM 15 years ago. Or government has to intervene. Not just the US government, but the Japanese and the European Union as well, for Microsoft knows no frontiers. But, given the economic orthodoxies of the age, neither government, nor Microsoft's most bitter competitors, have come up with any practical ideas.

Until the free market dogma adjusts to the dizzying realities of the technological revolution, Microsoft's grip on consumer choice will begin to acquire the sinister characteristics of the old Soviet Communist Party. Not that anyone is accusing Gates of betraying Stalinist tendencies. The bland, smug certitude he shares with David Cole and his other apostles that the future belongs to them evokes associations, rather, with "Our Ford", the divinity that presides over the totalitarian utopia in Aldous Huxley's novel Brave New World. Huxley's novel was published in 1932 when the Ford Motor Company dominated the automobile industry much as Microsoft dominates the computer business today. Today Huxley's divinity would be known as Our Bill.