Economist says Microsoft benefits consumers

Microsoft Corp.'s final witness, economist Richard Schmalensee, tried to deflate several of the central arguments in the government's antitrust case against the company during a morning session here today -- but not before Judge Thomas Penfield Jackson kicked off the day with a joke.

For much of the morning, Microsoft attorney Michael Lacovara led Schmalensee through a series of questions in an attempt to show that Microsoft's conduct has benefited consumers by creating more choice and lower prices in the browser market. "In brief, there's no evidence that Microsoft's actions, the actions the government's complained of, have harmed consumers," said Schmalensee, dean of the MIT Sloan School of Management.

Using several marketing charts that looked like they belonged in a PowerPoint presentation at a trade show rather than in a courtroom, Schmalensee said Microsoft's entry into the browser market helped to provide consumers with "a large number of browsers from which they can choose." One chart, entitled "Since the Release of Windows 95, Microsoft has Benefited Consumers in Many Ways," claimed the government's worries of increased browser and OS prices have failed to materialise.

The Department of Justice has accused Microsoft of using its dominance in the operating system market to usurp other markets, such as the browser business. But Schmalensee said both players in the browser battle are still alive and well. "Both sides in this war are still firing," he said. Schmalensee also said an examination of Microsoft's competitors should not be limited to just the operating systems space. He said several "platforms" existed that could lure developers away from Microsoft, including browsers, Linux, and Java.

But some of Schmalensee's statements contradict Microsoft's position on Java in 1997 and 1998, as Java was gaining momentum among developers. During that time, Microsoft executives would say repeatedly that Java was a great programming language, but not a platform.

Before Monday's testimony, Jackson read from a fake e-mail purported to be from a Microsoft user to the company's technical support department. In the e-mail joke, which has circulated around the Web for some time, the user is concerned that he has upgraded from a program called Girlfriend 1.0 to Wife 1.0, and the new upgrade has disabled some poker party and beer bash applications on his system. In a fake reply, Microsoft urges the user to stay with Wife 1.0 because, among other things, installing Wife 2.0 or Girlfriend 2.0 would cost too much money and be too much trouble.

"Wife 1.0 is an operating system designed to run everything," the judge read, as people in the courtroom chuckled.

Schmalensee already took the stand in January, as Microsoft's first witness. During his testimony in this phase, he will continue to rebut allegations by the DoJ's economist and will probably try to reverse some gaffes in his earlier appearance. In January, government attorneys pointed out that Schmalensee's statements on the stand contradicted some of his earlier writings, to which the economist replied he didn't know what he could have been thinking.

Government attorneys will cross examine Schmalensee after Microsoft attorneys complete their questioning.

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