BOSTON (06/12/2000) - In 90 days we will see what the appeals court thinks of Judge Jackson's ruling that Microsoft Corp. should be broken into two companies.
Oh dear. I find it hard to believe that Microsoft broken into two pieces will be any less of a problem. For a discussion on the pros and cons of the breakup, check out the last Networked World Webcast, which also features the video version of Backspin.
As everyone knows by now, at the heart of the fracas is the issue of whether Microsoft is a monopoly. But what is a monopoly? Merriam-Webster's Dictionary defines the word as "1: exclusive ownership through legal privilege, command of supply or concerted action; 2: exclusive possession or control; 3: a commodity controlled by one party."
Notice the key concepts "exclusive," "control" and "commodity." Those are the pivotal terms and I contend the government has not adequately shown they all apply to Microsoft. The company might not be a good playmate, indeed it may be a playground bully, but that's not a legal justification for dividing up its toys.
Now the focus of this week's Backspin is not actually Microsoft but AT&T Corp.
Specifically, it is AT&T's proposed merger with the cable TV and Internet access provider MediaOne Group Inc. In this case, the government, in the guise of the U.S. Federal Communications Commission, is not reining in a monopoly, it's creating one!
Just consider what's going on. AT&T, which already owns cable TV behemoth Tele-Communications, Inc. (TCI), would have 34.4 million subscribers when merged with MediaOne. This would be just under 42 percent of the U.S. market.
But the FCC has a "horizontal ownership" rule that prohibits a single company from having more than 30 percent of the nation's cable television and direct broadcast satellite subscribers, so AT&T has to divest part of itself within one year to be in compliance.
The routes to compliance would be to divest MediaOne's interest in Time Warner Entertainment; sell AT&T's programming interests, including Liberty Media Group; or divest the company's interests in other cable systems, which serve about 9.7 million subscribers.
But the bottom line is that whatever divestiture choice AT&T makes, it will still control the TV and cable Internet service of an enormous market. Not only is there no hint of a requirement to let other ISPs provide Internet service over the resulting AT&T cable network, there's no framework for price control either. In other words, the consumer is not being served.
Why would we care? I mean, this isn't about access to medical services or other vital resources, this is about television and surfing the 'Net! It's important because these information channels drive modern culture. Take either or both away and we'll all settle down to getting more work done, leading less distracted lives and being happier with our lot. And we certainly wouldn't want that now would we?
What I find interesting is the AT&T/MediaOne merger is getting relatively little examination while the attempted breakup of Microsoft is center stage. Am I missing something? Don't those concepts of "exclusive," "control" and "commodity" apply equally well to the AT&T/MediaOne merger?
It rather looks as if the FCC is allowing AT&T to put lipstick on a cable pig.
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