- The Washington Times - Tuesday, May 2, 2000

Government regulators are out to do private enterprise a big favor. On Friday they proposed to break up Microsoft in an effort to restore competition to the software industry. Under the proposal, said Department of Justice official Joel Klein, "neither ongoing government regulation nor the self-interest of an entrenched monopolist will decide what is best for consumers." Rather, he said, "the market" will decide.
This is the modern-day equivalent of destroying the village to save it. Mr. Klein proposes to destroy a key competitor in order to save competition, to replace Adam Smith's "invisible hand" with the federal government's clenched fist. If he thinks the public distrusts the government's ability to regulate software giant Microsoft, why does he think the public trusts the feds to break it up? The department's case against Microsoft is filled with unanswerables like this one, but the truth is Mr. Klein and other agency officials want both to break up the company and to continue to regulate it.
According to the plan proposed to U.S. District Judge Thomas Penfield Jackson last week, the feds would split Microsoft into separate firms. One would control the famous Windows operating system, from which consumers launch applications like word processing and money management. The second would hold the applications themselves. The idea is for the first firm to get applications to compete against the second, and for the second to provide applications to operating systems competing against Windows. Presto, competition.
If Judge Jackson agrees to the plan, perhaps later this summer, it would be one of the biggest breakups in U.S. history, although it would have to survive the appeals process to do so. Of course, the feds' experiment may not work the way it hopes, which is one reason people get nervous when regulators try to rearrange business flow charts more to their liking. By adding to its operating system software that allowed consumers to "browse" the Web, Microsoft forced competitors like Netscape to drop the charge for its own browser, made it easier for less high tech-savvy users to get to the Web and increased public access to it. There's no guarantee that breaking up the team would mean similar innovation and service.
The department's proposal doesn't end there, however. The feds want to impose what Wired magazine calls "extraordinarily strict government regulations" on Microsoft that would last three years after a breakup. Among the rules: No sale prices on Windows to computer makers. No sale prices to software and hardware developers in exchange for promoting Microsoft products. The government would have access to e-mail from all Microsoft officers, directors and managers for up to four years. The company with the feds looking over its shoulder would have to track all changes it makes to Windows that might or might not slow down the performance of third-party applications. Regulators could go onto company property to "inspect and copy" any document, e-mail and more.
If Mr. Klein and company don't like what Microsoft proposes to do, the company could find itself back in court to ask permission to innovate and improve its products. That sounds like a formula for progress on the order of the U.S. Postal Service, a monopoly that the Justice Department has somehow managed to overlook. One can only hope that Congress or some future administration can break up the regulators before they break up Microsoft.

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