DOJ vs. Microsoft: The untold story

In the suit it filed last week against Microsoft, the US Department of Justice claimed that the software company's Internet Explorer marketing efforts are illegal. But that charge is just one of many being made by Microsoft's rival. US Senate Judiciary Committee Chairman Orrin Hatch hinted at other allegations Microsoft competitors have made but were too afraid to go public with. An investigation by Network World has unearthed a good portion of these charges.

In the suit it filed last week against Microsoft, the US Department of Justice claimed that the software company's Internet Explorer marketing efforts are illegal. But that charge is just one of many being made by Microsoft's rival.

US Senate Judiciary Committee Chairman Orrin Hatch (Republican-Utah) hinted at other allegations Microsoft competitors have made but were too afraid to go public with. An investigation by Network World has unearthed a good portion of these charges.

Microsoft practices that concern rivals and users include the following:

-- Allegedly unfair integration of Windows NT and BackOffice applications

-- Approach to directories

-- Handling of its operating system and application APIs

-- Java strategy

-- Treatment of operating system rivals, such as Caldera and Taligent.

While last week's Justice Department action homed in on just Windows 95 and 98, NT also is at the center of a mounting pile of complaints.

Microsofts approach to BackOffice could pose a problem for Novell, according to one Novell official. Because the NT and BackOffice teams are part of the same company, the developers of NT's Active Directory Services (ADS) get insight into the guts of Microsoft Exchange, critics contend.

In fact, ADS essentially is an operating system feature, but it will also become the directory system for Microsoft Exchange, which is battling neck and neck with Lotus Notes in the groupware/e-mail market.

Novell, on the other hand, has had to reconstruct many of Exchange's APIs to support Microsoft's messaging system under Novell Directory Services for NT, one insider said. The end result may be that ADS, built into Exchange, will be a superior way to manage the e-mail system -- essentially locking Novell out of a key market segment. A Microsoft spokesperson argued that Novell has the same access to APIs as any developer. There are no secret meetings with developers at Microsoft, the spokesperson said.

While Windows NT does not currently enjoy a workstation or server monopoly, NT will ultimately replace the Windows 3.X and 4.X families and could thus develop such a monopoly, observers noted.

Giga Information Group, a Cambridge, Massachusetts, consultancy, has been tracking Microsoft's bundling strategy. Senior Analyst Randall Kennedy said Microsoft is abusing the Windows NT software licensing and upgrade process.

According to Kennedy, the NT Service Pack releases ought to be for maintenance, such as bug fixes. Instead, the Service Packs add lots of important new features to the operating system that normally would be included in a point release or upgrade. Then Microsoft releases new versions of the application that use the new features.

The Microsoft spokesperson argued that developers have the same access to fixes in service packs as Microsoft.

Database vendors are also concerned about NT. They're now starting to do with NT exactly what they've been doing with the Windows desktop -- they're bundling more and more of what is provided by other software companies into NT and BackOffice, said Mitchell Kertzman, chairman and president of Sybase.

"The most egregious example is Microsoft Transaction Server. When we announced our Jaguar transaction server, one Microsoft exec called and bullied me and tried to get me to back off on the product. I declined. Two weeks later they announced that [Microsoft Transaction Server] was now bundled with NT," Kertzman related. "Someone talked to me right after [the Microsoft executive] called: I said [to that person], I think I just talked to the godfather and he told me to stop selling drugs on his street corner.'"

According to Kertzman, Microsoft is using its monopolies in desktop operating systems and productivity software to drive NT and BackOffice. "I've been told that if you are a Microsoft Select Customer -- [and] you standardise on the Microsoft Office suite -- you can get a better price on BackOffice: this makes it very compelling for customers. But it starts with the MS Office software.

"What's the obvious connection between Office and Transaction Server? None," Kertzman said. Microsoft denies linking sales of Office and BackOffice.

Microsoft also bundles its Internet Information Server Web server, which competes with software from Netscape Communications and others, with the core NT operating system.

Kertzman suggested a Microsoft divestiture. "In general: you've got to separate the monopoly business from the other businesses they're linking to -- the OS vs. non-OS products," he said.

The divestiture issue has been raised in the past, with Microsoft being accused of using its APIs to give its own developers unfair inside access. This was an issue with Windows 3.1 and Microsoft Office developers, observers said.

And according to the Justice Department filing last week, Microsoft officials met with Netscape officials two years ago and proposed that Netscape stay out of the Windows browser market. In return, Microsoft reportedly agreed to stay out of the non-Windows browser market, according to Marc Andreessen, executive vice president of Netscape.

The reward for Netscape's cooperation? Preferential access to Microsoft APIs, Andreessen claimed. Microsoft Chairman Bill Gates, however, vehemently denied the claim, calling it "an outrageous lie."

Also prominent in the Justice Department complaint, but not part of the demands, are allegations that Microsoft has used its operating system dominance to thwart the spread of Sun Microsystems' Java programming language.

"Java is designed in part to permit applications written in it to be run on different operating systems," the complaint reads. "As such, it threatens to reduce or eliminate one of the key barriers to entry protecting Microsoft's operating system monopoly."

In its filing, the Justice Department quoted an internal Microsoft memo in which Group Vice President Paul Maritz emphasised the need to "fundamentally blunt Java/AWT momentum" to "protect our core asset, Windows."

There may be a simple legal way for the Justice Department to add items such as Java to its complaint, observers said.

"This suit is not about any particular product, such as Windows 95 or 98. It is on a particular action: tying," said Rebecca Lynn Eisenberg, an attorney, consultant and writer who regularly covers technology issues for the San Francisco Examiner. Eisenberg defined tying as using a monopoly in one market, such as operating systems, to take advantage of a monopoly in another market, such as browsers. "If the government pulls together enough evidence of the ways in which Microsoft used its monopoly in the OS market to gain unfair market advantage in the [NT] or [MS Office] markets, Microsoft's activities with respect to those products will come under fire."

Eisenberg believes the feds may well go after Microsoft over Java.

"To the extent that Microsoft has used its monopoly power to harm its competitor, Sun, and the possibility of what Sun hopes to be a powerful Windows competitor in Java, the government will go after Microsoft for those violations of the Sherman Antitrust Act as well," she said.

Caldera, founded by former Novell chief Ray Noorda, is also suing Microsoft on antitrust grounds. Caldera contends that Microsoft tried to destroy the market for DR-DOS by claiming the Caldera DOS-compatible operating system would not work well with Windows. In an amended complaint, Caldera is claiming that Microsoft used its Windows monopoly to squash DR-DOS.

The core of Caldera's complaint is that Microsoft bundled the still technically separate MS-DOS and Windows to create Windows 95, shutting any DOS rivals out of the market.

And of course, there is the now famous OS/2 bait and switch incident. IBM and Microsoft teamed up on OS/2, but then Microsoft began to back away and favor Windows. Many software developers, including Lotus, began to write for OS/2, while Microsoft focused on Windows. By the time Microsoft bailed out of OS/2, it already had a solid Windows applications strategy, leaving Lotus in its Windows dust.

Vendors such as IBM have long been accused of using pre-announcements to freeze the market, and now Microsoft is on the vapourware hot seat.

For instance, earlier this decade IBM and Apple Computer formed Taligent, a company designed to build an object-oriented operating system far superior to Windows. Microsoft then began talking about an NT upgrade code-named Cairo that was to do everything Taligent promised. Despite years of promises, Cairo never came out in the form Microsoft described and interest in Taligent dried up.

Pen computing is another area where Microsoft left a bit of a vapour trail. In 1991, a startup called GO Corp. started showing off its pen-based operating system. Microsoft leapt into action, announcing plans to include pen support in Windows when the company had barely started the project, critics contend.

Lotus also felt the sting of Microsoft vaporware. Once Lotus Notes started catching on, Microsoft began talking about its upcoming Exchange groupware tool, a product that took so many years to ship that it worked its way through several code names.

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