Microsoft Menace

Microsoft Menace
By Margie Wylie and Nick Wingfield
Staff Writers, CNET NEWS.COM

Gary Reback looks a little weary this morning.

Two years after he first wonthe spotlight by convincing Judge Daniel Sporkin to reexamine the JusticeDepartment's settlement with Microsoft, Reback's black hair is salted withgray and the boyish roundness of his face has turned lean. It's no wonder.Reback is a man with a mission to single-handedly reign in Microsoft.

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For those who question the purity of Microsoft's motives, the antitrust andintellectual property attorney has become David to the Goliath of Redmond,Washington. Not only did the upstart throw a monkey wrench in the Departmentof Justice settlement by writing a last-minute brief, but Reback was alsokey in persuading the DOJ to reject Microsoft's bid to buy Intuit.

Now he's written a long letter to the DOJ saying that Microsoft is skunkingcompetition in the Internet arena with its Internet Explorer, just as it didin operating systems. Nothing has come of that yet, but Reback said heexpects hearings when Congress reconvenes this year.

If he's a hero to smaller software companies, to Microsoft, Reback is amedia-manipulating menace. He admits he fights a lot of his battles in thecourt of public opinion through the media and doesn't think it unfair.Single-minded and as intense as an accomplished politician, Reback remained"on message," turning even personal questions back to the matter at hand:Microsoft's world domination.

NEWS.COM: Isn't Netscape's technology itself compelling enough to gain atoehold in this new market? Why take this legal route?
Reback: I think you have to remember that all of this began when Microsoftsent Netscape a letter demanding that it stop advertising the fact thatNetscape's products are cheaper and better than Microsoft's products whenused in conjunction with other Microsoft products. There are a lot of peoplein the Internet software space that make great products, but if Microsoft isable to squeeze them out through illegal means, then I think there's goingto have to be a legal remedy to that.

NEXT: Why Netscape is different from Microsoft

Why Netscape is different from Microsoft

Netscape, by its own estimates, has 85 percent of the browsermarket, which they acquired in part by giving away their software. Is thereany irony in the fact that they're accusing Microsoft of anticompetitivepractices?
No, I don't think so. Bill Gates has been quoted as saying that hewakes up in the middle of the night worried about his browser share. Is BillGates really concerned about a particular application that sells for $50?No. His concern is that the browser represents a partial substitute for theWindows operating system. If people write applications for the browser andbegin to use it as a substitute for Windows, all of the sudden Bill Gates'srevenue stream drops precipitously. Microsoft is sitting on top of one ofthe world's greatest monopolies of all time, and they're going to do damnnear anything they can to keep the forces of technology and the normalforces of the free market from eroding that monopoly. That includesintentionally crippling their own technology; squeezing OEMs not to carrycompetitors' products; paying middlemen like the Wall Street Journalto disadvantage users of Netscape; and bundling, tying, and leveraging. It'sthe fundamental Microsoft monopoly in operating systems that Netscapechallenges, and that's what really keeps Bill Gates up at night.

Microsoft would argue the definition of an operating system isn'tstatic. It seems this thing that we run applications on is evolving to maybebe a browser in a year. Is there anything inherently wrong with Microsoftsaying another function of the operating system is Web serving or browsing?
How far would you like to carry this? Can they say that a functionof the operating system is relational database software? Can they say it'sword processing? That's been their position all along, and they've put outof business one market after another. You've talked about how muchcompetition there is on the Internet. How much competition is there forproductivity applications? Do we have competition for word processinganymore? No. Microsoft engaged in this illegal behavior and ran thecompetitors out of the market.

Marc Andreessen says Netscape doesn't create proprietaryextensions to HTML or other aspects of their browser; they innovate. Butthere are those people who accuse Netscape of doing the same thing that youaccuse Microsoft of doing, such as, for example, withholding source code forJava scripts and plug-ins.
The argument that you've raised is one that Microsoft has raised,but generally speaking in the software industry, it really doesn't carrymuch weight. Netscape, for example, runs on 16 platforms; Microsoft runs onMicrosoft. That's Microsoft's view of the world; that will always be theirview of the world.

AT&T, because it was a monopoly, was able to create a verycompatible, interoperable infrastructure. Hasn't Microsoft succeeded indoing the same thing with the desktop operating system?
Certainly, to some extent. The question is whether the efficienciesthat they've achieved are worth the competitive damage that they'veinflicted on society. Couldn't we achieve the same degree of innovation ifwe required Microsoft to publish its APIs on a timely basis? There's noreason why a dozen companies couldn't make a product that would seamlesslyintegrate with the operating system, and I think consumers would benefitenormously if that were the case.

Doesn't the failure of the Microsoft Network in the face of theInternet show that even Microsoft is subject to the whims of the market?
It's true that the technologies move rapidly, but should wetherefore permit someone to monopolize the basic technology on the theorythat perhaps over time their position might naturally be eroded? I mean,after all, the dinosaurs died in 300 or 400 million years. IBM had amonopoly for, what, 25 years? When there's a monopoly, people suffer.Consumers don't get the benefit of the best products. I don't think that itwould be fair for us to think that we should just wait and let the freemarket take care of this problem when it would take a long time to do it.

So in your view, where do we draw the line?
If Microsoft wants to make better Web servers or better browsers, doit on a fair-and-square basis, and people buy it, so be it. But if they makebetter products because people in their operating system group give secretinformation to the people in their browser group and they get a head start,or secret information to the people in their Web server group and they get ahead start, that's not fair. That's not the American way, and that's notwhat's best for the consumer.

As Microsoft expands in this media realm, do you see other newopportunities for yourself?
I think that there is a real issue here about whether a company thathas a monopoly in something so fundamental as desktop operating systemsshould be expanding into the media in this way. I think that that's going tobe debated very hard over the next year.

NEXT: Playing to the audience

Playing to the audience

In the past, it seems you've played out a lot of the case againstMicrosoft in the media. Will that continue in Netscape's case?
Well, certainly a portion of it is going to be played out throughthe media because it's very important that people understand these issuesand discuss them. It's far more important that they be discussed on programslike this than they be discussed in courts, because I think once peopleunderstand that their choices are being restricted in an artificial way,they're going to be very upset and demand changes.

So how do you answer Microsoft's charge that you're just apublicity hound?
I don't answer that charge. The kinds of allegations we've madeabout Microsoft's conduct have now been confirmed in the press. Thosecharges are independently verifiable. I'm not really the issue here. Theissue here is Microsoft's conduct. I have no control over consumers, butMicrosoft, through its monopoly of the desktop operating system, hasenormous potential to harm consumers. So that's where our focus really oughtto be: not on me, but on Microsoft.

Is the fact that Microsoft is sort of this great American successstory an impediment to stopping them?
Well, I look at Microsoft and I say, "Bill Gates benefitedenormously when he was in his 20s because there was an open market and freecompetition." Shouldn't Marc Andreessen have that shot? Shouldn't otherpeople who are coming along have that same shot? Microsoft has certainlybeen successful, but the truth is the entire American software industry hasbeen successful. The American software industry dominates the internationallandscape. I would say between 40 and 60 percent of all of my clients'business is done overseas. So if you look at the balance of payments, theAmerican software industry is sort of keeping us afloat. If any one companycame to dominate that industry, I think that edge would be lost.

Is Bill Gates the problem at Microsoft? Would things be differentif he weren't at the helm?
I don't know the answer to that. I don't know Bill well enough tomake that kind of assessment. Obviously, he has also surrounded himself withvery intense people, and I have to say in many respects that's good. I thinkthe concern at the moment, though, is that there is a broad feeling thatthey think that Microsoft can flout consumer choice; that they might bebigger than the government; that they can do essentially whatever they wantto do and the government won't step in.

So I don't see the issue as being one of whether Bill Gates continues to beat the helm. I hope he continues to be at the helm. I see the issue as beingone of whether the government is going to step in and have a role here. Inthose situations where the government has stepped in, Gates backed off. TakeIntuit, for example. When the government said they were going to challengethat, he took his marbles and went back up to Redmond. If the governmentstood up a little bit here, there would be a lot more competition and a lotless monopoly.

NEXT: What drives Gary Reback

What drives Gary Reback

Is there a Reback's Law, a bromide, or a saying that you live by?
As a litigator I sort of live by the notion of fear and loathing tomy adversary, but in this context I live by the notion of free and opencompetition for the consumer. That's what drives me every day. This isreally philosophical for me. I don't own stock in the companies that we'vebeen talking about. I certainly make a good living, but not the kind ofliving that Bill Gates and his friends make.

People often ask me why am I so committed to all this. I tell them that I'velistened to Bill and I hear what he wants to do, and I don't believe in it.I don't think it's good. I don't think it's good for one person or companyto have that kind of power. It's almost religious with me. I think thatthere needs to be free and open competition, and I think it's important thatpeople stand up for that concept.

When you're a lawyer, lots of times you have to defend causes you don'tbelieve in, frankly. Lots of times you might get up in the morning wonderingwhether you're making a contribution to society or not. I have no doubtabout that. I think that I'm doing something that's beneficial for a lot ofpeople, not just for me. I feel good about my practice and this practicegenerally, and I think it's one of the most interesting types of practicesthat a lawyer could possibly have.

With (retiring Assistant Attorney General) Anne Bingaman, who ledthe charge against Microsoft gone, and after the last huge investigation ledto nothing, is there anyone left at the Justice Department really willing totake on Microsoft?
In speeches that Joel Klein has made, he has indicated a far moresensitive recognition of some of these problems than Bingaman ever did. Ialso think there might be a role for the Federal Trade Commission in thefuture. The Federal Trade Commission in the past few months has hadimportant hearings about the software industry, and just published a veryimpressive report in which they talk about the fact that companies thatcontrol interface specifications need to be really closely scrutinized bythe government, lest they run competitors out of the market and out of alladjacent markets. So I think they get it too.

I think we're going to see, over the coming weeks and months, an increasedgovernment role. I've also begun to hear people on Capitol Hill suggestingthat there might be hearings at the beginning of the year, and those aresuggestions that have been made to me. We've made no effort. We haven't hadthe time, frankly, to talk to anybody in Congress about these problems. Butthere is a genuine grass-roots outpouring of concern that I think hasreached Senators and Congressmen and women as they've been back from break,and from what we're hearing, people are beginning to focus on that. So yes,I think there's going to be something out of the government. Will it come intime? I think that is the key question.

I mean, after all, the government did go after Microsoft and got them toplead no contest to the (consent) decree in the operating system market, butby then it was too late. There wasn't any competition left. The governmentunderstands now that they did what they did too late, but the question is,can they get it together and move in timely fashion? I don't know the answerto that.