MS settlement reads like a fairy tale

I've spent the weekend reading the proposed settlement between Microsoft and the U.S. Department of Justice. I've also talked to a few lawyers, some news colleagues, and people in the industry. They've led me to one conclusion: Nobody is precisely sure what it means, but the total effect seems little more than a hand-slap for Bill & Co.

In the document's 21 pages, I found what seemed like real toughness on the DOJ's part, only to find it watered down a few paragraphs or pages later. Words that mean one thing to you and me seem to mean something else in the settlement. Prohibitions that exist in one section seem to be rendered meaningless by another.

The total effect is like a visit to Alice in Wonderland. Depending on definitions and exceptions lurking inside the document, it could contain as many mirages as Lewis Carroll's classic story.

Here are some of the concerns I've heard expressed. I can't say if they're right or wrong--but neither can anybody else, save a certain federal judge:

• Though the ruling makes it easier for non-Microsoft applications called "middleware" (Internet Explorer, Java VM, Windows Media Player, Messenger, Outlook Express, and their successors) to get onto the desktop, it still allows Microsoft to discriminate against companies that haven't sold a million copies in the U.S. and survived for a year after doing so. This means that companies that don't need protection from Microsoft are the only ones who get it.

• Hardware vendors would be allowed to place non-Microsoft icons on the desktop, but only if Microsoft already has a competing product. Think up something before Microsoft does, and they can still exclude you from the desktop because they don't (yet) compete with you. So much for first-mover advantage.

• Microsoft has to provide developers with information on its application programming interfaces--at least those APIs developers need to exercise their rights under the agreement. But there's a Catch-22: If a developer actually uses the APIs, it must provide its code back to Microsoft. This could allow Microsoft to use any innovation created by third parties. So how much innovation will happen?

• Under the agreement, Microsoft would be required to disclose these APIs at the time of the "last" beta release of new Windows OS code. Since Microsoft gets to decide which release is the "final beta," it could, essentially, release the final beta on one day and release the code a week or two later, giving it a significant time-to-market advantage.

• Microsoft retains the ability to discriminate against Internet content providers, and the settlement would allow indirect discrimination against software vendors through arrangements with hardware companies.

• All the previous double-talk seems minor compared to this: The settlement would allow Microsoft to terminate licensing agreements first--and defend its actions later. Microsoft may also continue to manipulate pricing schemes and discounts. In these ways, Microsoft has lost little of its ability to keep hardware companies in line. Even if I ignore all the gotcha's outlined above, the proposed settlement really doesn't change very much. If Jackson's break-up order was an empire-shattering 9 on the Richter scale, then the settlement proposal is a 2.1--usually called a microquake, and barely felt unless you're right on top of it.

  As someone generally considered to have been in Microsoft's corner throughout the three years of this court battle, I find the proposed settlement more than a little embarrassing. If I didn't like Judge Jackson's break-up ruling, I like the proposed settlement only a little more. You nuke Netscape and abuse monopoly power and then lie about it in federal court--and this is what happens to you?

  So now it's up to the states. After the fed's embarrassing sell-out to Microsoft, it's now up to the other plaintiffs to keep the heat on. On Tuesday we're supposed to find out if they will--whether 18 states and the District of Columbia are willing to take on Microsoft and at the same time fight the settlement it crafted with the Justice Department.

  I wish they would, but doubt they will press on very hard. The judge in the case doesn't have to accept the proposed settlement, but she will. Maybe with some changes, but the essentials will, I am sad to say, remain intact.

  And a final observation: A year ago, in endorsing Al Gore's presidential candidacy, I warned my Republican friends that a vote for Bush was a vote for Microsoft. And while Attorney General John Ashcroft denies White House complicity, can there be any doubt the settlement would be vastly different if Democrats were in charge?