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US vs. Microsoft: A New Cold War For 21st Century?

Antitrust dispute indicates that sides see regulation of the rapidly changing software industry in completely different ways.

Six years after the dissolution of the Soviet Union, Washington may have finally found a superpower adversary for the 21st century: Microsoft Inc.

True, the Microsoft air force consists of one Challenger 640 business jet, and its ground troops know more about stock options than flanking moves. "Bill Gates" (its leader's name) doesn't sound nearly as menacing as "Yuri Andropov."

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But the United States government and the software giant are now locked in an antitrust dispute that's escalating so quickly it seems a legal equivalent of the Cuban Missile Crisis. Neither side appears to understand the cultural background of the other. Both are recruiting allies - lawyers and lobbyists - as fast as they can.

The US is looking at software as it would look at oil or railroads. Microsoft is using its market position in operating systems, the basic software of all PCs, to unfairly muscle in on the new business of Internet browsing, say Justice Department lawyers.

But Microsoft keeps insisting that Washington just doesn't fathom the pace or marketing practices of its industry. In computers, today's superpower is tomorrow's Albania.

"Gates sees himself as constantly innovating and providing new products, and he's wondering why the government is going after him for that," says Robert Crandall, an antitrust expert at the Brookings Institution.

So far, the lawyers from Washington appear to have an edge over the software firm from Washington State. That's perhaps not surprising, considering that D.C. is to law what Silicon Valley is to microchips.

Microsoft's latest courtroom setback occurred on Dec.19.

The company had been arguing that removing its Internet Explorer web-browsing software from the latest version of its Windows 95 operating system, as a federal judge had ordered it to do, would cripple the system. PCs treated so roughly might not be able to start up, or "boot," the company said.

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So the federal district judge in question, Thomas Penfield Jackson, ran a little experiment of his own. He set up a brand new PC and removed the Web browser, via easy-to-use utility tools included with Windows itself. The computer ran fine.

Now Microsoft must send an expert to appear at a scheduled Jan. 13 hearing, and explain why it should not be held in contempt of court for its previous assertion.

"If [the process] is not that simple, I'd like to have it refuted," said Judge Jackson.

Company officials insist that it isn't that simple, of course. They say the judge's technique actually left much of the Internet Explorer computer code behind - and that they had been ordered to remove it all from the Windows 95 program.

But if nothing else, the demonstration was embarrassing and added to the belief of the firm's Washington opponents that Microsoft is treating the whole affair with contempt.

"To hear Microsoft talk about it, you'd think there's never been antitrust enforcement in the software or computer area before," says James Love, director of the Consumer Project on Technology, a group associated with Microsoft opponent Ralph Nader.

Longstanding dispute

In fact, the Justice Department has been investigating the fast-growing Microsoft - and its control of the software industry - for much of the 1990s. In 1995, the Justice Department and the software company signed a consent decree under which Microsoft agreed to not tie the licensing of one of its products to another.

At issue now is whether the company has violated that pact. Its basic defense is that Windows and Internet Explorer aren't different products, but part of the same, integrated package.

Opponents retort that Internet Explorer is also sold as a stand-alone program in its own package, and is often referred to as a "product" in Microsoft documents.

Everything to fight for

The stakes in the fight could hardly be higher, as far as Microsoft is concerned. If it loses, company officials insist they might have to get government approval anytime they want to add a new feature to Windows, such as automatic speech recognition.

"Antitrust law should promote product improvement, not product degradation," wrote Microsoft senior corporate attorney David Heiner in a Dec. 17 letter to the Justice Department.

Thus the outcome of the case could have huge implications for the computer industry as a whole - and could affect the pending merger of MCI Corporation and WorldCom Inc., as well as other communications deals.

Right now, this struggle of the giants has reached the escalation phase. Microsoft, which didn't even open a Washington office until three years ago, has hired the premier Washington law firm of Covington & Burling, among others, to help in its defense. Anti-Microsoft forces have enlisted former GOP presidential candidate Bob Dole and the public relations firm of former Carter administration spokesman Jody Powell, to lobby on their behalf. Besides the Justice Department, groups that have lined up against Microsoft include software competitors and such potential rivals as travel agents and the newspaper industry.

Opposition to the Windows 95 juggernaut has put Ralph Nader and conservative Republican Sen. Orrin Hatch of Utah in the same camp. Senator Hatch held hearings on alleged Microsoft abuses earlier this fall. (Utah is home to one of Microsoft's largest software competitors.)

"Antitrust issues about software are not just minor technical things. They're fundamental things about the shape of the economy," says Mr. Love.

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