Doctor Jekyll and Mr Gates

Corporate paragon or rapacious monopolist? Microsoft has been called both, write Steve Hamm and Susan Garland, US Business Week. But there is no question that the software maker is one of the most successful companies on the planet.

As its power has grown, so have the number of complaints from rivals, who accuse Microsoft of unfair play, and say its monopoly of the PC operating system market stifles competition.

These concerns spurred 'trustbusters' to investigate the company, starting in 1991 with a Trade Commission (FTC) probe. The case was taken up by the Justice Department (DoJ) which resulted in a decree issued in July 1995 that restricted some of Microsoft's Windows licensing practices. Then, on 22 October, the DoJ issued a petition charging Microsoft with violating that decree.

Microsoft's virtual monopoly of PC operating systems means that most new computer buyers see Microsoft's Internet Explorer browser prominently displayed when they start up their machine. PC makers can bundle Netscape's Navigator browser as well, but that involves paying an extra licensing fee.

The DoJ is worried that Microsoft will use its dominance of operating systems not only to gain an unfair advantage in Web browsers and other markets but also to protect its current monopoly.

The DoJ argues that Internet browser technology developed by Microsoft's com- petitors 'may be an important element in the re-introduction of competition to the PC operating system market.' The federal government points out that Web browsers can serve as a new 'platform' for which applications can be written.

The federal government has released correspondence from several PC makers - including IBM and Compaq - reporting that they had been reminded by Microsoft that their licence for Windows 95 requires them to install Internet Explorer. Microsoft does not deny that it requires computer makers to ship its browser along with Windows 95, but it argues that the product is an extension of Windows and not a separate product. Further, it claims that the federal government was well aware of its plans to create a Web browser and to ship it with Windows 95 and that it did not object at the time of the decree.

Microsoft says the decree explicitly recognises the company's right to add new capabilities to its operating system and to create 'integrated' products. The government's suit, Microsoft maintains, is an improper attempt to meddle in software product design - a move that it contends could stifle innovation in the computer industry.

So, is Internet Explorer a separate product or part of Windows? It's comparable to windscreen wipers and a car, Microsoft argues. Wipers can be sold separately, but they're an integral part of any new car. But most analysts and experts say Internet Explorer 4.0 is a distinct product - separately branded, marketed, and sold.

The case will be closely fought. The provision in question forbids Microsoft from tying the licensing of one product, such as Windows, to the licensing of another, say, a browser. But, the agreement also states 'this provision in and of itself shall not be construed to prohibit Microsoft from developing integrated products'.

Microsoft interprets that as a licence to build features such as Web browsing into its operating systems. That's what it intends to do with Windows 98, due next spring. The DoJ may be able to win a case that says that Internet Explorer 4.0 is a separate product from Windows 95, but it could be a short-lived victory once Microsoft integrates browsing capabilities into Windows.

And Microsoft has released documents that indicate the DoJ knew during the consent decree negotiations that the software maker intended to integrate browser features into the operating system. This kind of proof could torpedo the contract issue that is part of the current cause of action.

A US district court judge will decide whether to order a trial - which could take months to get underway. The DoJ has asked for a $1 million-per-day fine against Microsoft if the court finds that it has violated the consent decree. That's small change for Microsoft, but the company says it will quickly comply with a court order if it loses. That would clearly be a plus for Netscape, but if the case drags on, that buys time for Microsoft to build browser market share. It also buys time for Microsoft to ready Windows 98, which it says will thoroughly integrate Web browsing.