Microsofthas a monopoly in the operating system world, right? Not so fast. The government still must prove that premise in court.
The inflammatory e-mail, damning testimonies and character attacks that punctuated the first two weeks of the Microsoft antitrust trial will mean nothing if the Department of Justice, 20 states and the District of Columbia fail to demonstrate Microsoft has a monopoly.
While the testimony of computer industry executives from Netscape Communications and America Online has made headlines, the group of relatively obscure economists who will be called to the witness stand in the coming weeks may prove more important to the trial's outcome.
"It all means nothing if the government cannot prove that not only does Microsoft have a monopoly but that the barriers to entry are nearly impossible to break through," said Rich Gray, a partner at Bergeson, Eliopoulos, Grady & Gray.
To prove this point, the Justice Department is relying on the testimony of Franklin Fisher, professor of economics at MIT, and Frederick Warren-Boulton, a former chief economist at the DOJ and now a principal at Microeconomic Consulting Research and Associates.
Microsoft has enlisted Richard Schmalensee, interim dean at MIT's Sloan School of Management.
The importance of proving Microsoft's monopoly was clear this week during the cross-examination of David Colburn, AOL's senior vice president of business affairs.
Microsoft's lead litigator, John Warden, introduced letters, e-mail messages and memos in an effort to prove AOL and Netscape had discussions about dividing markets.
Warden said that this was no different from the government's allegation that Microsoft, in its June 21, 1995, meeting with Netscape, tried to bully Netscape into relinquishing the Windows 95 browser market to Microsoft.
However, DOJ attorney David Boies was quick to counter, saying that Warden's argument was specious because neither AOL nor Netscape has a monopoly.
"You had two companies, neither of which, separately or together, would have monopoly power in any market," Boies said outside the courtroom.
In a declaration submitted to the DOJ in May, MIT's Fisher detailed how "network effects" build competitive barriers to entry, a key point the government needs to prove.
Network effects, according to Fisher's declaration, occur when each person's benefit from using a product or technology increases as more people begin to use that product or technology. Windows, Fisher said, is an example of a product that reaps the benefits of network effects.
"There is nothing inherently anti-competitive about this," Fisher said in the declaration. "However, network effects create high barriers to competition and entry in operating systems. This increases the risk that anti-competitive conduct by Microsoft will increase barriers even further."
Additional reporting by Charles Cooper, ZDNN, and Will Rodger, Inter@ctiveWeek
