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Experts line up to back DoJ MS breakup plan

Large pile of declarations argues it makes sense

MS on Trial One of the surprises in the recent filing by the DoJ was a series of six weighty accompanying Declarations. Five have been put online, but not the one by Ernest Von Simson, who is described by the DoJ as "a computer consultant to large global enterprises".

In fact Von Simson was previously director of research for the Diebold Group, and is now with Asera, a Kleiner-Perkins backed business solutions provider in Redwood City, California. He is also on the board of Linuxcare. Von Simson was a founder of the Research Board, which specialises in advising the top 100 CIOs worldwide. His role was presumably to comment on the viability of the DoJ plan, but there are no clues as to why his effort should not have been made available: perhaps he didn't want any rival using it as a template.

The other declarations were by computer scientist Edward Felten; Robert Greenhill and Jeffrey Williams of Greenhill & Co, who were retained by the DoJ to advise on breakup (and which we will examine separately); economist Paul Romer; former deputy assistant attorney general Carl Shapiro; and Rebecca Henderson, a management expert. With the exception of Felten and Greenhill, each author has rather laboriously been through a learning process with some of the documentation, so that it is difficult to distinguish their original contribution from a regurgitation of previously known information.

This makes the Declarations rather boring, and less likely to have the desired impact on Judge Jackson (who probably doesn't need it anyway). Future students may be suitably impressed, however, quite apart from their offspring. ("What did you do during the Microsoft wars, Daddy - or Mummy?)

The DoJ should have given some guidance about this, since it was no doubt paying handsomely for the effort. The Henderson and Greenhill Declarations also contain excessively long CVs that are in effect marketing materials. Unfortunately, the exhibits referred to in the text have not been made available so far.

There can be little doubt that the Declarations are intended to give the Supreme Court confidence that serious, independent academic opinion is that the proposed remedies are feasible and likely to be effective. Completely lacking is a mature industry view. We can be sure that Microsoft will have its own set of academics taking the shilling, but there will be suspicion about their opinions if any of them has previously received overt or covert funding from Microsoft.


Princeton Computer scientist Edward Felten of IE-removal program fame and who testified twice for the DoJ during the trial, is back again. He was asked by the DoJ to look at the technical aspects of the proposed remedies. He makes the point that the use of the term "middleware product" by the plaintiffs is "a non-technical definition", but since it was Judge Jackson who really started misusing it first, he is wisely circumspect in his criticism.

He also notes that the DoJ introduced the definition of "binding" for "bundling a product into an Operating System Product without allowing OEMs and users ready means to remove or uninstall the product". We shall no doubt hear a great deal more about this from Microsoft, in view of the finding of law that Microsoft illegally bound IE to Windows 98. Having elaborated on some of the dodgy definitions used by the DoJ, Felten turns his attention to the technical benefits of porting Microsoft Office to non-Microsoft operating systems.

He sees a benefit of ported Microsoft Office middleware as the ability to run Windows apps on MS Office. File sharing would also be easier, he says. Felten also disposes of another Microsoft - or to be more precise, Gates - myth that it is necessary for an operating system and browser to be developed under the same roof. Pointing to the Caldera OpenLinux demonstration with KDE during the trial, he notes that they were produced by different organisations.

Felten also says it is essential that Microsoft be required to provide full information about interfaces, since plug-in mechanisms fall far short of guaranteeing interoperability. He really puts the boot in when he comments on the expected effect of Kerberos (the widely-used standard protocol for improving the security of networked systems) in Windows 2000, where a modified version is implemented, with a proprietary extension to the standard Kerberos protocol. It's another example of Microsoft vp Paul Maritz' maxim: "embrace, extend, and extinguish".

Because Microsoft has refused to disclose its modified Kerberos protocol, non-Microsoft server Operating System Products cannot implement the modified protocol and consequently cannot interoperate fully with Windows 2000 Professional. However the DoJ's proposed remedies would oblige Microsoft to provide the key information for product interoperation. Felten notes that: "It has been reported that Microsoft has stated an intention to disclose its proprietary extensions to Kerberos at some point in the future.

It is not clear whether or when this will happen, or what conditions Microsoft will impose on companies in exchange for access to the disclosed information. In any case, even if the information is released immediately and unconditionally, Microsoft will have significantly disadvantaged competing server Operating System Products by withholding the information for so long. This illustrates the need for the timeliness requirement."

Felten notes that Microsoft would be obliged by the terms of the remedies to make it possible for users to have a version of Windows without IE, and that both OEMs and users would be able to achieve this, so sparing users from the technical costs incurred by any undesired binding. Windows 2000 Professional has IE bound to it, as well as Outlook Express, NetMeeting, and Windows Media Player. The cost of Windows without IE would also have to be reduced in proportion the reduction in binary code size.

The remedy calls for Microsoft to be given six months from the effective date of the decree to bring itself into compliance with the binding provisions, so giving "improvements in the efficiency and reliability of Windows". Felten says this is "ample time", but no doubt Microsoft will have another view. Commenting on the provision to allow OEMs to configure Windows, Felten wryly notes that he doesn't think the provision "would lead to any degradation of Windows, because OEMs would have no incentive to make Windows worse". Felten's conclusion is that the remedies if implemented would "provide technical benefits to consumers."


Rebecca Henderson is a British-born academic at the MIT Sloan School of Management, where she specialises in the economics of technological change, and the dynamics of competition over time. She was asked by the DoJ to comment on the proposed remedy. Her data includes an update of the AdKnowledge browser market share, showing that IE had 69 per cent in April 2000 compared with Netscape's 20 per cent. The crossover to IE dominance had occurred in July 1998, the data suggest, which was not exactly how it was presented at trial.

Henderson's view is that splitting Microsoft would be a more effective way to reestablish market power, since Microsoft's monopoly would be weakened, rather than relying on an extensive set of permanent prohibitions. She observes that Court supervision would not necessarily be effective in detecting Microsoft's monopoly-protection moves. So far as Microsoft's entry into server-based middleware is concerned, she suggests that without the ability to act anticompetitively, Microsoft would not necessarily be a winner.

She quotes Microsoft vp Craig Mundie saying last month that "There have been less than 10 million Palm units sold. That's a rounding error in units and revenue for us". Henderson is blunt in describing Microsoft's actions against suppliers and developers as "bribing" them.

She concludes: "If Microsoft is permitted to build upon the fruits of its victory in the browser war and to continue its campaign of anticompetitive conduct, consumers will be greatly harmed. Microsoft's control of the PC operating system gives it both incentive and ability to crush any software that threatens to facilitate the erosion of the application barrier to entry. The remedies proposed will prevent Microsoft from crippling competition and will release a flood of innovative energy. Rapid action is vital to ensure that innovation and consumer choice in this particularly important sector of the economy are preserved." Solid stuff.


Stanford economist Paul Romer was asked by the DoJ to evaluate the economic effects of the proposed remedies. His area of expertise is new growth theory, and how the rate of technological change is determined by marketplace incentives. He observes that Microsoft interfered with the process of innovation in three ways: as a result of Microsoft's tricks users did not get innovative products; Microsoft's predatory acts chilled innovative efforts; and Microsoft harmed the innovative process by limiting competition.

He expects the remedies to restore the state of the software industry in the mid 1990s, but makes no reference to the preceding half decade when MS-DOS/Windows played an analogous role to Windows/IE. Romer quotes an unidentified Microsoft insider as saying: "let's face facts. Innovation has never been Microsoft's strong suite. We're much better at ripping off our competitors. For example, we did not invent either ASP [active server pages] or IE, we bought them!"

Romer also quotes the redacted Gates email of 11 July 1999, and prefixes it with the following comments: "Windows CE... competes with the Palm operating system. It [Microsoft] has further indicated a willingness to change the details of its Office applications to favor devices that run Windows operating systems, even if doing so disadvantages its customers who now rely on the Palm Pilot." So it seems that Microsoft is using MS Office in ways that are not designed to help users, but do help to strengthen Microsoft's monopoly.

Romer backs the DoJ's provisions designed to stop Microsoft making changes before the reorganisation and so present the Court with a fait accompli that would make it difficult to impose its will. A major benefit of it all will be more and faster innovation, Romer suggests, and the ensuing benefit of this would far outweigh the expected costs of the splitting.


Carl Shapiro is now an economist at Berkeley and an expert on antitrust, innovation and network industries. He spent 1995 and 1996 as a deputy assistant attorney general for economics in the DoJ antitrust division. He helped Atari against Nintendo, Intel in the 1998 antitrust case with the FTC, and advised Borland in connection with the Ashton-Tate acquisition, so he's been around a bit.

He canters through the proposed remedies and find everything hunky-dory. He even thinks that the remedies will "encourage innovation by Microsoft, since Microsoft will have to add valuable new functionality to support an increase in the price of Windows: unless the new release of Windows offers new functions that consumer truly value, consumers will simply pick the predecessor version of Windows at the prevailing price. Effectively, Microsoft has enhanced incentives to improve its Windows product to compete against its own predecessor version." Shapiro thinks that lowering entry barriers should be the primary objective of the remedies, as a means of remedying the harm to competition caused by Microsoft's anticompetitive conduct. ®

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