Why We'll Never See Anything Like the Microsoft Antitrust Case Again

Back in 1987, SMU lost its football program for a season after the NCAA -- the governing body of collegiate athletics here in the United States, for those who might not know -- handed the school the infamous "death penalty" for repeated rules violations.

The school chose to cancel the 1988 season and therefore went two years without football, which in Texas is kind of like going without air or water for two years. Needless to say, the scandal rocked the state and, among college football fans, the nation. (One of ESPN's "30 for 30" documentaries, Pony Excess, did a mostly marvelous job last year of recounting the whole sordid episode.)

In the early 1980s, when the payroll was huge and talents such as Eric Dickerson and Craig James were sporting the famous Mustang logo (yes, Ford named the car after the SMU Mustangs -- true story), SMU, a relatively small school with a mixed history in football, was good. Really good -- arguably the best team in college football in the early 1980s. But SMU cheated (a lot) and the NCAA finally put a stop to it. Never mind that other schools, which we won't name, cheated rampantly for years and never got any punishment that even approached the severity of the death penalty. That's another rant for another blog.

The point here is that the death penalty -- administered only once -- was harsh. So harsh, in fact, that it did effectively kill SMU's program for more than two decades. Only in the last couple of years and after considerable turmoil have the Mustangs begun to pull themselves out of the mire and become competitive again. Pretty much any observer of college football who knows the SMU story will say that the NCAA will never hand down the death penalty again -- and, in fact, it could have by now to several other schools but hasn't. It was just too much, too harsh, too severe. And it certainly didn't curtail cheating in college football as a whole, which remains common, if a little more stealth these days (although the program at Rose Bowl champion TCU is, of course, completely clean -- seriously). 

Anyway, the parallels between SMU's death penalty and the U.S. government's antitrust oversight of Microsoft, which ends this week after a decade, aren't especially strong, except for one thing: It's doubtful that we'll ever see anything like either one of them again. Back in the late-'90s, the panic about Microsoft's dominance in the operating system market and its supposed execution-style killing of the Netscape browser were such that a U.S. District Court judge -- Thomas Penfield Jackson, you remember him -- ordered the software giant broken in two. Microsoft appealed and stayed intact, but the government watched it like a hawk for the following decade. And many industry firms lined up to make to make Microsoft look only slightly more dominant and suffocating with power than Genghis Khan. 

Your editor was a teenager in Texas during the SMU scandal and was a reporter for a fairly well-known trade magazine during the original Microsoft lawsuit; he remembers them both well and actually covered the lawsuit in some depth. With the benefit of hindsight, the prevailing feeling now is that both episodes were a little ridiculous. The death penalty and its excessiveness we've already discussed, but the Microsoft "remedy" now looks pretty silly as well. Microsoft, after all, remained one company, but it didn't continue to crush the rest of the industry.

In fact, these days, despite still owning a huge portion of the market share for PC operating systems, Microsoft finds itself well behind some of its competitors in other key -- arguably much more important -- areas. Some observers posit that open source is what made the Microsoft antitrust scare -- and for those who don't remember, there was very real panic and hand-wringing about it on all sides -- ultimately irrelevant. And we think there's a lot of credence to that.

But we look at the withering of Microsoft from terrifying titan to mere giant from a broader perspective. The reason Microsoft isn't an antitrust threat anymore is because other companies have out-innovated the folks in Redmond, and the 'Softies, by contrast, have under-innovated in recent years. We haven't forgotten, as many seem to have, that Microsoft bailed out Apple financially in 1997 when the hipster company was on the brink of extinction. But Apple made the most of the lifeline, eventually creating the iEverything line of products that now dominates consumer electronics and is rapidly moving into the enterprise with the iPhone and iPad.

And then there's Google, which wasn't even on the radar screen in 1997 (remember using search engines like HotBot and Lycos?) but has emerged as the locked-in No. 1 firm in consumer search and has also taken over, with Apple, the ever-expanding market for mobile operating systems. Google was born out of an era in which the government was watching supposedly dangerous and competition-quashing Microsoft, and yet Google managed to grow right under Microsoft's nose and steal from the folks in Redmond markets they would love to dominate but now likely never will. Let's also not forget Amazon, which went from quaint online bookseller to major enterprise technology provider during the big, bad Microsoft era, and companies like Salesforce.com, which used the cloud and SaaS to get a jump on bigger competitors, including Microsoft.

Did the government help Apple, Google and the others by "watching" Microsoft and making sure it didn't step out of line? Probably not (although Microsoft's investment in Apple was a move to fend off the feds). Those companies succeeded because they either forged or beat the competition (namely Microsoft) to new markets and out-smarted and out-innovated a company in Redmond that had become a bit complacent. Your editor said in 1997 -- and we've always said in this space -- that the "remedy" for "monopolies" isn't the government coming down hard on one big, dominant company but instead other players in the market figuring out how to slay the beast. That's exactly why the notion of Microsoft as dangerous monopolist is laughable these days -- because competitors have beaten it to the punch in market after market and turned it into a desperate also-ran in lots of key areas. That was the market's doing, not the government's.

And that's why, we're saying here, we'll never see another government crackdown in the technology industry like the one we saw with Microsoft for the last decade-and-a-half -- and we shouldn't. Technology is not a commodity industry. Microsoft was never Standard Oil. Technology is an innovation industry, and innovation can come from anywhere and out of nowhere. Just when one player looks unbeatable, another can come along with a new product or even a whole new concept and knock it off its perch. Apple's reign as undisputed king of the mobile phone OS didn't last long once Google got Android rolling. Will Google always be the No. 1 search provider? Maybe, but we can't know for sure. Somebody out there might have a better idea and might find a way to get it implemented.

If there's any lesson we've learned from the U.S. government's ultimately pointless hounding of Microsoft, it's that nothing is a sure thing in the technology industry. Nobody stays on top forever -- not IBM, not Microsoft, probably not even Apple or Google. So it seems kind of ridiculous for the government and industry players to freak out and call for penalties and oversight for dominant or "monopolist" companies in the tech industry. The Microsoft case has proven that sort of excessive oversight to be silly and unnecessary (and even a bit embarrassing), and like SMU's death penalty, we think and hope that we'll never see anything like it again.

How much of a role should the government play in regulating the technology industry? How much of a monopolist does Microsoft look like to you these days? Leave a comment below or send your answers to [email protected].

Posted by Lee Pender on May 12, 2011