Microsoft Begins Trial Defense

Microsoft has begun its defense in the government's antitrust trial against it with written testimony from Massachusetts Institute of Technology economics professor Richard Schmalansee.

The Federal Government and 19 state governments have presented 12 witnesses to bolster their case that Microsoft has illegally maintained its monopoly in PC operating systems and has tried to extend that monopoly through illegal business practices.

Schmalansee, testifying just after his MIT colleague, Franklin Fisher, the government's 12th and final witness, said that Microsoft charges "far less than the textbook monopoly price for Windows and is constantly engaged in innovation to stay ahead of the competition." He says the company faces "long-run competition from its installed base, pirated copies of its operating system, existing vendors of operating systems and a long list of potential entrants," such as Linux.

Fisher said the idea that Linux or other operating systems could take OS market share from Microsoft was "a joke." He said Microsoft has practiced monopolistic pricing by raising the price of Windows 95 after it released Windows 98 and charging different prices to computer manufacturers for licensing Windows. The Wall Street Journal has reported that Microsoft charged Compaq Computer Corp. and Dell Computer Corp. far lower prices than Gateway and IBM since Gateway and IBM tended to endorse the products of Microsoft rivals.

On the subject of Netscape, Schmalansee argued that Microsoft has been unable to prevent Netscape from distributing its rival Web browser, while Fisher countered that Microsoft had prevented Netscape from distributing its browser through the least expensive means, such as bundling with the operating system or through Internet service providers.

--D. Callaghan