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S P E C I A L Target: Microsoft

Microsoft 'monopoly' debated in Senate

Gates defends his company before a Senate panel  

"No company owns the factory for ideas ..."
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"The software industry's success has not been driven by government regulation ..."
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"Innovation depends on freedom ..."
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Netscape's Barksdale speaks out against monopolies
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Sun's McNealy wants "enforcement of the laws ..."
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Dell's Michael Dell denies his firm's licensing agreement with Microsoft excludes other browser firms. "Netscape is freely available on the Internet ..."
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(197 K / 18 sec. audio)
"Microsoft has a monopoly," claims venture capitalist Stuart Alsop of New Enterprise Associates
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"Most innovative industry ..." says Sen. Patrick Leahy, D-Vermont
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Gates: Innovation, not greed, drives Internet

March 3, 1998
Web posted at: 9:24 p.m. EST (0224 GMT)

In this story:

WASHINGTON (CNN) -- Computer industry bosses gave opposing views Tuesday on whether Microsoft has a monopoly in the software business, but they were united in urging the government to keep hands off the industry.

In his first appearance before Congress, Microsoft President Bill Gates said his company's dominant position was due to rapid changes in technology, not a desire to monopolize the computer industry.

"In the end, the software industry, which contributed over $100 billion to the national economy last year, is an open economic opportunity for any entrepreneur in America," Gates told the Senate Judiciary Committee. Government control would only restrict innovation, he said.

Gates also rejected charges that his company intends to turn the Internet into a toll road for which Microsoft could require royalties.

"We have no plan to use our platform software ... to charge any type of transaction fee," he said.

"When people come to a site of ours, like or some of the other sites we are building -- if they want to, say, buy an airline ticket, then we will collect a transaction fee. But people who use the Microsoft browser will in no way, through the use of that browser or the Windows platform, be subject to any type of transaction fee."

Microsoft likened to Pac Man

Committee chairman Sen. Orrin Hatch, R-Utah, opened the hearing by noting that Microsoft's "breathtaking growth ... has for many raised serious questions about the future of competition and innovation in the software industry."

Sen. Herb Kohl, D-Wisconsin, was more pointed.

"Mr. Gates, no one -- no matter how powerful-- is above the law," he said. He and the other senators said they had not prejudged Microsoft's business practices.

The Microsoft chief sat at a witness table with CEOs of other computer and software companies, including two bitter rivals -- James Barksdale of Netscape Communications and Scott McNealy, chief executive of Sun Microsystems.

"We think, left unchecked, Microsoft has a monopoly position that they could use to leverage their way into banking, newspapers, cable, and broadcasting, Internet service providers, applications, data bases browsers. You name it," McNealy said.

"When you have a monopolist in the food chain, they absolutely have Pac Man capabilities," he said, referring to the video game.

Later in the day, to illustrate how Microsoft dominates the field, McNealy pointed out to CNN's Judy Woodruff that its Windows operating system is on 90 percent of the personal computers sold.

Bill Gates' opening statement to the committee
Opening statements from the other industry representatives
An excerpt of the Microsoft 'monopoly' debate in the Senate
CNN's Judy Woodruff talks to Scott McNealy, president and CEO of Sun Microsystems Inc.

"Are you going to change your desktop environment from Windows to something else?" he said rhetorically.

"The only technology I'd rather own than Windows would be English," McNealy said. "All of those who use English would have to pay me a couple hundred dollars a year just for the right to speak English. And then I can charge you upgrades when I add new alphabet characters like 'n' and 't.' It would be a wonderful business."

McNealy said, "The problem with a monopolist is you can't run the experiment and see if anyone else is out there innovating in office productivity tools or desktop operating systems and would charge less for an even better product. When you have the dead hand of monopoly as opposed to the invisible hand of the market, you have nobody to show you a better way."

Netscape boss takes an instant poll

At the hearing, turning to address the audience, Barksdale called for a show of hands to make his case against Gates' company.

  T R A N S C R I P T S
Transcripts of testimony from the hearing
  • Bill Gates, Microsoft CEO
  • Scott McNealy, Sun Microsystems CEO
  • Jim Barksdale, Netscape CEO
  • Sen. Orrin Hatch, Bill Gates q & a
  • "How many of you use Intel-based PCs in this audience, not Macintoshes?" he asked. Several hands went up.

    Barksdale continued: "Of that group who use PCs, how many of you use a PC without Microsoft's operating system?"

    When all the hands went down, Barksdale turned to the Senate panel and said, "Gentlemen, that is a monopoly."

    Consensus: no new government regulations

    While Gates and his rivals disagree intensely about Microsoft 's business tactics, they are like-minded on one point: Government should impose no new regulations on the Internet or the software business in general.

    "I agree with Mr. Gates' point of view," Barksdale said. "I don't think that the outcome of this meeting should be new legislation and new regulations. I don't think it's needed. And I think it would have a harmful effect. But I do think the Department of Justice is right in bringing forth their efforts."

    The department has charged that Microsoft holds a monopoly in the market for personal computer operating systems and has accused the company of violating a 1995 consent decree that was aimed at increasing competition in the software industry.

    Gates has said Microsoft would lose its industry leadership position if the federal agency wins its lawsuit alleging that the company is leveraging its dominance in Windows 95 operating system software to gain business in the market for Internet browsers.


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