BROOKE GLADSTONE: The past two weeks have been good for Microsoft. Not only did the company acquire Skype, the multibillion-dollar Internet voice communication company, it also bid adieu to its committee of federally appointed chaperones. The committee was created in the wake of the government’s antitrust case against Microsoft back in 1997. Its job was to make sure Microsoft stayed in compliance with U.S. antitrust laws. Many people have argued that Microsoft should be split in two parts. One would just oversee Microsoft’s Windows operating system and the applications programmed for it – Microsoft Office, Microsoft Word. The other would strictly oversee Internet Explorer, the company’s Web browser. Instead, Microsoft was allowed to remain intact. Now, as the company’s panel of overseers go gently into that good night, we wondered did any of this matter? Did it make any difference? We asked Tim Wu, author of The Master Switch and advisor to the Federal Trade Commission.
TIM WU: The Justice Department was right to bring the case. I speak for myself, not my employer, the FTC. I, I strongly feel this was the right decision. Personally, and speaking again only for myself, I think they should have broke the company into two pieces, the operating system and the applications, and we would have seen a lot more innovation, things like competitors to Word and PowerPoint and Excel that actually had some chance of success.
BROOKE GLADSTONE: But Larry Seltzer, who’s a contributing editor at PC Magazine, notes, and I'm quoting him now: “Everyone who ever bought a Microsoft product had alternatives. They chose to buy the Microsoft product. The products sucked, but all things considered, they were better than the alternatives.”
TIM WU: If we agree that, that Windows was the best, even if it sucked, the problem wasn't so much Microsoft’s attaining of a monopoly, which is legal. It was the use of its monopoly power subsequently to try to destroy competitors in the browser market, which is a very different issue.
BROOKE GLADSTONE: Meanwhile, browsers are free, and one of the most popular ones, Mozilla’s Firefox, is actually open source. Users can work on it, not just corporate developers. So why do you think government intervention was even necessary?
TIM WU: Microsoft was not allowed to monopolize the browser market. Google, Facebook, maybe Wikipedia, Skype, all the Internet companies of the noughts and of the 1990s might have become Microsoft’s latest victims. I believe the fate of Google would have been – and of Facebook – would have been very similar to the fate of WordPerfect and Lotus 1-2-3 – very powerful companies, arguably the best products in their class, that were all trounced by Microsoft, not on their merits but because of the control of the platform. Microsoft had a repeated pattern where it would set up a platform, invite everyone in, copy the most successful products with their own product and then make sure that they won the competition. And I think we avoided that fate, making the Justice Department’s case ultimately justified.
BROOKE GLADSTONE: To bring up Larry Seltzer one last time, he says that the computer industry changed because of the free enterprise that was always there and not because the government stepped in and made things better.
TIM WU: If you knew that starting a company like Facebook was suicide because Microsoft would copy you and eliminate you off their browser, it would have been a very different market. And so, I think the last 10 or 11 years of development on the Web was partially because no one owned the Web, no one can control the Web. No one had the, shall we say, the master switch over who won and, and lost [BROOKE LAUGHS] on that network.
BROOKE GLADSTONE: Clever interpolation of the title of your book. But let's bring up The Master Switch again.
TIM WU: Sure.
BROOKE GLADSTONE: Could it happen again? Could it be once again in the thrall of one great company that will smother the development of competitors?
TIM WU: History tends to repeat itself and, given a chance, men and women tend to dream of glory and empire. That’s why I think that the attitude that, you know, antitrust laws are sort of a matter of the past is, is to neglect the fundamentals of human nature. I imagine our future will be like our past.
BROOKE GLADSTONE: So you think that this panel of overseers actually worked?
TIM WU: What I think was important was Microsoft knowing that it was under watch. People behave differently with a policeman at the elbow. I mean, the most obvious thing that Microsoft could have done was to create Explorer in a way that favored its own search and disadvantaged Google. But I think they sensed that if they started to try to mess with the search engine market through their browser, that next thing you knew, the antitrust authorities would be on them again. Sometimes the most important thing a government can do with a dominant monopolist is to just let them know that they're being watched.
BROOKE GLADSTONE: Yeah. Thank God we have the Securities and Exchange Commission keeping its eye on Wall Street.
TIM WU: That was a different [LAUGHING] set of problems.
[LAUGHTER] I, I don't want to comment on [LAUGHTER] the Securities Exchange Commission.
BROOKE GLADSTONE: Tim, thank you very much.
TIM WU: Always a great pleasure.
BROOKE GLADSTONE: Tim Wu is Senior Advisor to the FTC and author of the book The Master Switch.