Who Wins If Microsoft Breaks Up?

Ever since Microsoft was declared a monopoly by U.S. District Judge Thomas Penfield Jackson a couple of weeks ago, the remedy game has become the most popular pastime among legal experts and pundits.

There is no doubt about the excitement of the high-stakes drama being played out before our very eyes, as the entire world speculates about what the final fate of Microsoft will be.

The taming of Bill Gates and Co. is something that Microsoft’s rivals have been dreaming about for years. However, as the reality of the different remedies the court may impose upon the software giant sinks in, I am beginning to wonder whether the cure might be worse than the disease.

Horizontal Breakup

Breaking Microsoft into three separate companies — one with operating systems, another with applications software and a third with Microsoft’s Internet businesses — is one possible remedy that is being bandied about.

Nonetheless, many critics of this solution feel that it would still fail to create competition in the marketplace for new operating systems – which was the main reason for the action against Microsoft in the first place.

Vertical Shakedown

Another remedy is to have Microsoft divided into three “Baby Bills,” with each company getting a third of the assets in every line of business. There is little doubt that this scenario would create competition, but detractors fear that by fracturing the Windows standard, consumers would end up paying more for the operating system.

Open Source Licensing

The open source licensing remedy would force Microsoft to make its Windows source code available to other companies, even though these companies would not be allowed to use it to make clones.

The upside to this remedy is that software companies would finally be able to compete with Microsoft. However, the downside is that software pirates would also be able to easily reproduce illegal copies of the Windows operating system.

A Windows Auction

Another remedy being considered is to force Windows to auction off its license. This remedy presumes that major players such as Sun Microsystems and IBM would be interested in bidding on a license to sell their own version of Windows if given the chance.

Still, this scenario does not take into account the billions of dollars spent in research and development that would have to be shelled out by these companies to continuously upgrade the Windows product in order to stay competitive.

Close Court Supervision

Finally, the most draconian of remedies being considered would have the government micromanaging Microsoft by establishing rules on how it conducts its business. These rules would cover everything from its contracts with other companies to its pricing.

The downside of this scenario is that it runs contrary to the basic tenets of the free enterprise system — not to mention the fact that millions of taxpayers would be forced to ante up in order to keep such a bureaucracy in place.

Like Impeaching A President

Unfortunately, trying to break up Microsoft is a little like trying to impeach the President of the United States. If you find him guilty — even if punishment is deserved — you throw the country in turmoil by exacting the penalty.

Now that Microsoft has been officially declared a monopoly, any penalty exacted — even if deserved — is apt to negatively affect millions of innocent bystanders.

What do you think? Let’s talk about it.

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