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The battle between the Justice Department and Microsoft shows a gap between the thinking reflected in a 1995 federal court order laying out competitive ground rules for the software company and the reality Microsoft's pushing hard to create - making the line between operating system and Web browser vanish.
It's in that gap that Microsoft finds a loophole it hopes to exploit in its new round of legal fisticuffs with the Feds.
Dismissing as "misguided" the government's allegations that it is limiting PC-maker and consumer choice by trying to require installation of Internet Explorer on machines sold with Windows 95, Microsoft's nimble legal corps put its own spin on the decree: Integration is just what the 1995 document permits it to do. In fact, Microsoft maintains, integration will help consumers by giving them an easy way to locate information, whether it's on their hard drive or the Internet.
The issue of software integration is, indeed, open to interpretation.
"How can you tell the difference between tying or bundling and producing a piece of integrated software?" asked Frederick Warren-Boulton, a consultant with Microeconomic Consulting and Research Associates. "There's no [legal] definition. We don't know what an integrated product is."
The software giant can make its claim because the consent decree is inherently weak, noted Warren-Boulton, an old hand in the antitrust arena with stints as President Ronald Reagan's chief economist and as part of a trio of economists consulting on behalf of Novell Corp. when the government's original Microsoft antitrust probe began in 1990. He co-wrote an analysis of the Microsoft decree in the June 1995 Antitrust Bulletin.
Warren-Boulton said the consent degree's weakness stems from its inclusion of only one type of licensing agreement, in which Microsoft forced PC-makers to pay it for each unit produced regardless of whether machines included the software giant's MS-DOS operating system.
"[The Justice Department] just said, 'You can't sin in this way,' but left the door open for other ways to sin," Warren-Boulton said.
Glen Woroch, Warren-Boulton's cohort on Novell's antitrust team and currently director of the consortium for research on telecommunications policy at the University of California, Berkeley, said Microsoft has exploited this opening to its own advantage.
Woroch said the situation in the browser market mirrors the one that existed in the operating system arena in the early 1990s. At that time, Microsoft dominated the character-based operating system market with MS-DOS while it was trying to introduce its fledgling graphical user interface system, Windows, into a market that had competition from the likes of IBM's OS/2 and Apple's Macintosh. Seven years later, Windows is the dominant operating system, and Microsoft is trying to bring its new program, Internet Explorer, into a browser market with a well-established player, Netscape, already on the scene.
Internet Explorer 4.0, the latest, most ambitious version of the browser, needs to run on top of the Windows OS just as Windows must run on top of DOS. Like Novell's late DR-DOS, Netscape's Navigator and Communicator browsers aren't tied to any other operating system. Without some outside intervention, Netscape appears vulnerable, Woroch said.
"All Microsoft is going to do to comply [with the consent decree] is bundle it with Windows, and Netscape is going to go the route of DR-DOS," he said. "If, in the next two years, Microsoft ties Windows with Internet Explorer, to think people are going to download Netscape and override Explorer - I just don't see it. Netscape is history."
By going to the US Court of Appeals, the Justice Department is, in effect, trying to change the course of history by halting Microsoft's push toward an unchallengeable combination of IE and Windows, said Susan Creighton, a partner with Wilson Sonsini Goodrich and Rosati.
To Creighton, who is part of the firm's legal team that has been at the epicenter of a spate of antitrust actions designed to shake the monopolistic giant from its perch, Microsoft's actions with respect to browsers fails a basic antitrust law test: It's not clear that Microsoft is the essential conduit for marrying operating system and browser.
"Is there something Microsoft can point to that says, 'Only if we, Microsoft, put these two products together can you get these efficiencies,'" said Creighton, who currently represents Netscape. "That's patently not true.... People can get Internet Explorer today, download it, and make it part of their computers.
"It doesn't require a computer-maker forcing the consumer to take the two products together," she said.
Microsoft's strategy stems from the realization that browsers, by opening up the desktop to the Internet, are reducing the importance of operating systems.
"[Browsers] take computing beyond the desktop, where Microsoft rules, and into the Internet, where no one rules," Joel Klein, the assistant attorney general leading the Justice Department's antitrust division, said Monday.
Microsoft's answer to this threat, in the interpretation of Klein, Warren-Boulton, and other company critics, has been to try to extend its omnipresence on the desktop into new realms here and around the world.
"Now the problem is there's an incentive to sabotage the other guy's browser," Warren-Boulton said.
Microsoft rebuts talk of sabotage by holding itself up as the standard-bearer for the US software industry and arguing that the government shouldn't weaken one of its strongest companies in such an important market, Woroch and Warren-Boulton said.
That argument doesn't carry much weight with Warren-Boulton.
"The best way to encourage exports is to have a competitive, dynamic industry," he said.
Should the government's latest attempt to clip Microsoft's wings prove successful, it could play a decisive role in the browser wars and deal the industry and consumers something of a setback by delaying the marriage between browsers and operating systems.
Consumers seeking simplicity will take a hit in the short run: If they're among the majority who use Netscape, they must configure their operating systems and browsers to work together.
"Consumers want a nice integrated bundled product at the lowest price, and this is contradictory," Warren-Boulton said. But he added that he believes confusion about mixing and matching is a small price to pay for competition.
Pointing to Microsoft's perceived lack of desire to win a competition based solely on its products' features, Creighton said she believes the company has nothing left to do but resort to its strong-arm tactics.
"If it doesn't engage in coercive conduct, then Microsoft must win on its merits, and it's not limiting itself to doing that," Creighton said.
Circumventing these strong-arm tactics will take considerable Justice Department grit.
The department is going to have to stop the integration of Internet Explorer and Windows before Windows 98 arrives - a move that will be possible only if Klein and other federal lawyers persuade the Court of Appeals to revise the 1995 court order.
"The past history is that Microsoft will do almost anything to get around the consent decree," Warren-Boulton said. "The Justice Department's got to bite the bullet, otherwise, what will we do when Windows 98 arrives as an integrated product?"
