Tying Up Windows 2000

SAN MATEO (04/24/2000) - While the U.S. Department of Justice prepares to recommend remedies to restrain Microsoft Corp.'s monopolistic practices, Microsoft foes have introduced new allegations that the software giant is using Windows 2000 to extend its dominance into the server and network markets.

In a white paper handed over to federal officials, the Computer and Communications Industry Association (CCIA), a trade group supported by several of Microsoft's archrivals, has charged that Windows 2000 will only perform well and enable several key networking functions if users deploy it on both servers and desktop systems.

The paper states that Microsoft's strategy of "technologically tying" servers and desktop platforms together through Windows 2000 is blatantly repeating the tying tactic used with its Internet Explorer browser and Windows 95 and 98 desktop operating systems.

"We are not saying this is necessarily a new action. But we are saying there is a similar pattern here involving their use of power. If there is anything that is supposed to be solved by an antitrust case, it is to prevent the sort of conduct which was found improper," said Ed Black, president and CEO of CCIA, based in Washington.

Microsoft representatives last week brushed the new accusations aside, contending that the server market -- which they said is largely controlled by rivals such as Oracle, Sun Microsystems, and IBM -- remains competitive.

Overall, Microsoft claims the company's right to include new features in its server operating system is no different than its competitors' efforts to win over new customers.

Since the Justice Department's remedy recommendations are due to U.S. District Judge Thomas Penfield Jackson no later than April 28, some experts predict that the new allegations will carry little weight in changing the severity of the remedy.

"From the time line, it sounds like [Jackson] is not going to hear testimony [during the remedy phase of the case]," said Phillip O'Neill, an antitrust attorney from Jackson's former law firm, Jackson & Campbell, in Washington.

But O'Neill said it is feasible that government lawyers would try to use CCIA's server-based arguments even though they are not directly related to the case.

Still, others believe that the white paper does raise a legitimate point about whether Microsoft's monopoly on the desktop gives them an unfair advantage going forward in the server market.

"You could certainly make that case, but that is a whole separate case from the browser issue," said Dwight Davis, an analyst at Summit Strategies, in Seattle.

"You can't really extrapolate the trial to test Microsoft's dominance in server software. But that isn't to say that some ambitious attorneys couldn't start making the case," he added.

What could undermine the client-server tying claim, in the view of some observers, is that the government did not bring up the issue at the trial.

Another negating factor, they claim, is that in a May 1998 ruling, Jackson dismissed the government's leveraging claim.

He noted that using one's strength in "one area to compete in another is not a violation of Section 2 even if it gives you a competitive advantage," said Rick Rule, a partner at Covington and Burley, a law firm in Washington, and a legal consultant to Microsoft.

However, Black said he believes that the technology tying accusation will stick based on what Jackson has already noted in his conclusions of law ruling.

"Microsoft thinks it will win this [tying issue] in the appeals court. But if they thought that, they wouldn't be spending all this money they are spending now in the political process," Black said.

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