Book Review for 7/7/02 by James Carland Title: "The Microsoft File: The Secret Case Against Bill

Gates" Author: Wendy Goldman Rohm Publisher: Random House/Times Business Length: 313 pages Price: $25.95 Reading time: 24 hours Reading rating: 8 (1= very difficult; 10 = very easy) Overall rating: 3 (1 = average; 4 = outstanding)

Who could not be enticed with the following introduction? "Is Microsoft's rise as the world's most powerful and successful company in the computer and information industries a classic example of the free market at work? Is Microsoft's success and the failure of other companies the result of the creative destruction that makes capitalism so strong and unique? Or was there another force at work?...Microsoft, under the leadership of its founding genius, Bill Gates, has engaged in a pattern of predatory business practices over the past decade that have all but killed the market in operating systems and applications software, and now likewise threaten to stifle free competition in the Internet and electronic commerce arenas" (p. xi). This book is the result of hundreds of interviews and it presents information about the rule, "essential facility," that Microsoft allegedly broke. "...[P]roof of essential facility involved a four-part test: control of the facility by a monopolist, a competitor's inability to practically or reasonably duplicate the essential facility, the denial of the use of the facility to a competitor, and the feasibility of providing the facility to the competitor" (p. 145). Many competitors testified that Microsoft "...had withheld from the industry important technical information that it gave freely to its own application developers," therefore, causing competing software to experience glitches and Windows to crash. The book lists principles developed by Ken Wasch of the Software Publishers Association for the Justice Department to help identify potential remedies without damaging competition. They are: (pp. 280-284) 1. Maximize Innovation [for the benefit of consumers]. 2. Nondiscriminatory Licensing of Interface Specifications to Third Party Software Developers [for third party software developers in the same timely fashion as for one's own developers and to certify compatibility of the operating system to the competitor's applications]. In this case, the operating system is the "essential facility" required for the functionality of all application software. 3. Leveraging an Operating System into the Sale of Products and Services. [Operating systems should not give an advantage to one's own products over those of competitors as in Microsoft's strategy of "product integration."] 4. Competitive Licensing of Software Applications to Original Equipment Manufacturers (OEMs). [Tying the pricing of the operating system to the price of software applications

and/or certain application to the sale of other applications restrains competition and can create a monopoly. Since Microsoft holds a monopoly in the operating systems arena, bundling its own applications to the operating system package and offering such as price breaks to computer makers is predatory.] 5. Equal Access to Retail Customers. 6. Disadvantaging Competing Software Products [through the use of warnings and suggestions of incompatibility]. "A software vendor should not intentionally disable, cripple or otherwise interfere with the intended functionality and execution of other products" (p. 282). 7. Discriminatory Access to Internet Content. [Consumers should be free to choose their own providers and their own links to the internet.] 8. Pre-Announcements and Vaporware. "...the intentional pre-announcement of products that do not yet exist can have the effect of freezing the market. When a preannouncement is knowingly false, it may harm competition and restrict the availability to the market of innovative products from other vendors." These seem reasonable precepts by which to compete. My concern is that Microsoft may have stifled innovation in the software industry both at the operating and application software level by indulging in unfair trade practices. Innovation is the engine that drives a great economy. Mediocrity can destroy it and that is why it is so important to compete fairly. Let the best product win! James W. Carland is professor of entrepreneurship in the College of Business at Western Carolina University.