- The Washington Times - Monday, June 26, 2000

SAN DIEGO.

When I was a kid, my mother used to say in her thick German accent, "Be careful what you ask for because you just might get it." It was good advice for me when I was 12, and it's good advice for the companies advocating Microsoft's breakup.

By now most of us know the Justice Department's case against Microsoft was instigated largely by industry rivals at Netscape, Sun Microsystems and Apple Computer who wanted the government to do what the market would not: give them a leg up on Microsoft.

If the breakup order issued by Judge Thomas Penfield Jackson ever takes effect, these same leaders and their anti-Microsoft cohorts may some day wonder, "What were we thinking?"

Consider the meteoric rise of Linux, the free operating system (OS) rival to Windows. Unknown when the Justice Department first filed its case against Microsoft, Linux has captured 25 percent of the highly profitable network server market. Matthew Newton of PC World Magazine reports that while Linux's desktop marketshare is still only 4 percent, after last year's debut of Linux as a viable operating system "existing Linux companies made plans to go public, new Linux companies sprang up like lemonade stands during a heat wave, and companies that had never heard of the OS stumbled over themselves to adopt a 'Linux strategy' [and watch their stocks rise]."

Indeed, a host of companies that have enjoyed limited success in the Windows applications market now are investing heavily to develop a whole generation of software for the non-Microsoft operating system. Hardware companies also are jumping on the Linux bandwagon: Dell, IBM and other major manufacturers are offering server and desktop equipment featuring Linux instead of Windows.

The rise of Linux seriously undermines the government's claim that Microsoft has monopoly power. It also highlights the dangers of creating a new, separate Microsoft "applications company," as ordered by Judge Jackson.

To date, Microsoft has almost completely ignored the Linux OS, preferring instead to enhance and develop the next generations of Windows and Windows-based applications. If a new Microsoft applications company were created, that company would have a powerful incentive to develop software for all operating systems, including Linux and Apple's Macintosh OS.

What would this mean for Microsoft's applications competitors like VMWare, Corel, Red Hat, and others rushing to serve the growing market of Linux users? "It would wipe them out," says Jerry Hilburn of Catfish Software. "They could port every Microsoft application over to Linux in no time, and corporate Linux users would snap them up like hotcakes because it would dramatically lower their retraining costs compared to retraining people on software from different vendors." In other words, how many companies will bother to retrain their employees in Corel's Quattro Pro spreadsheet software for Linux if they can seamlessly switch to Microsoft Excel?

While I may not share the wisdom of the lawyers-turned-software-engineers at Janet Reno's Justice Department, it seems to me that "wiping out" a new generation of software companies would neither be in the interest of consumers nor the industry.

Non-Linux companies have reason to be concerned too. The breakup order issued by Judge Jackson represents a massive intrusion of the federal government into the technology sector. In the last 40 years, government has recognized it is completely incapable of regulating trucking, airlines, telecommunications, railroads and electricity. Software, on the other hand, should be snap?

The timing of this "government knows best" notion toward technology could not be worse. The Microsoft decision is concurrent with attempts by local telephone monopolies to seek relief from the deregulatory incentives in the 1996 Telecommunications Act, a drive to regulate cable companies' broad-band Internet access, and a fascination by state and local governments with the idea of a new national sales tax collection scheme for online commerce.

Earlier this month, the Commerce Department again reported that for the last four years, the burgeoning technology sector has provided American business with the tools to dramatically improve productivity. Federal Reserve Board Chairman Alan Greenspan and leading economists agree these productivity increases have kept inflation in check while unemployment falls to record lows.

Most Americans would consider all this good news to be reason enough for government to keep its nose out of technology. Yet while the Internet is changing everything, one thing it cannot change is the irresistible urge by those in government to tax and regulate. Technology companies should not be cheering them on.



Ron Nehring is the director of national campaigns for Americans for Tax Reform.

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