The proposal that Microsoft be broken into three parts is the latest and most frightening of the government's proposals.
Republicans seem to be siding with Microsoft because they don't want to be associated with the breakup of one of America's most successful companies. I agree with the Republicans. A forced breakup of Microsoft is too draconian an action, even if the company has been tough on its competitors.
The argument for a breakup is based on the relationship between operating software (such as Windows) and applications software (such as Microsoft's Encarta, the digital encyclopedia). Computers need operating software to run different applications.
The government thinks Microsoft has designed its operating systems to favor its applications products, to the wrongful exclusion of competitors' applications products. The government also argues that Microsoft's products favor Microsoft's network and search engine. I may be oversimplifying the particulars but I think these issues are at the core of the government's case.
But the government doesn't seem satisfied with a simple breakup. The proposal is to separate Microsoft into three (not two) companies. Two of the companies would develop and sell operating systems, and one would develop applications software. That way, multiple companies could sell Windows, providing price competition. And the relationship between operating and applications software would not be so incestuous.
I have argued before that any action that seriously affects Microsoft's ability to do business would harm the public good. The information highway is in early developmental stages. It brings to mind the early days of railroads, when different gauge track made it difficult to send goods across the country. Sending information across the globe is exceedingly more complex than moving railroad cars and involves millions of people.
Whether or not you think Microsoft has been fair in its strategy, it has clearly been the principal enabler of information flow, and is a principal enabler of new forms of commerce.
The job of standardization is not finished. In fact, it's just beginning. And standardization does not mean a single dominant player in the information technology and communications industries. But someone has to lay the tracks. Remember, many railroads survived the standard gauge. Microsoft just has to be fair in letting other people use its tracks.
But the biggest risk in a breakup is that no one knows what the future will bring. The computer, communications and media industries are clearly morphing. The merger of AOL and Time Warner is the most recent example. What's the difference between media, telecommunications, software publishing and computer companies? It's getting hard to tell. And what products and services will consumers need to access what these companies have to offer?
A breakup of Microsoft assumes a static world. In a year, if the government prevails, it will have succeeded in creating three Neanderthal companies out of one of our nation's most creative enterprises.
There also is the incongruity of the government allowing other giants in these morphing industries to form while it attacks Microsoft. AOL/Time Warner is the largest. But other deals are being made between giants. IBM, HP, EDS, Disney, Ariba, AT&T, MCI and literally thousands of other technology and information content companies are forming megaventures. There's plenty of competition out there for Microsoft. The government need not worry.
And how does the government intend to execute a Microsoft breakup? How will its people and intellectual property be distributed? Are there three Bill Gateses or three Steve Balmers (Microsoft's new CEO)? A breakup will be a management nightmare and will disrupt service, development, and will most likely result in the loss of billions of dollars in shareholder value.
The world needs Microsoft in its current form. We need it to invent. We need it to change. With Bill Gates assuming the role of his company's chief technology architect, he signals his willingness to deliver on this challenge. He and his associates are far too capable to sweep away.
If Microsoft did something wrong, its executives have the message by now and are smart enough to fix the situation. It's time to leave the company alone.
_ Tribune Media Services