COURT NOTES: Launching a final week of testimony in the antitrust trial, Microsoft attorneys recalled economist Richard Schmalensee as its last rebuttal witness. Schmalensee, whose testimony in January was ripped apart by government attorney David Boies [see NewsSource, Jan. 25], was called back to the stand to explain once again how Microsoft's 'natural' monopoly benefits consumers. One of the witness' points was to try and show how Microsoft - despite controlling the market - has kept prices for its operating systems steady for the last five years. He also cited Linux and Java as serious competitors to the Windows platform, even though Microsoft (until recently) referred to Java as a non-platform programming language.
To support his claims about the price of Windows, Schmalensee had to disprove statements made by government economic witness Franklin Fisher, who earlier said Windows is the most expensive component of the average new computer. Schmalensee attacked that argument, accusing Fisher of using the average prices of monitorless computers in his figures. He concluded that if Microsoft did indeed have a competition-free monopoly, Windows would be around $265 per copy instead of the $65 they currently charge manufacturers for the operating system.
When Microsoft finished with the witness, Judge Thomas Penfield Jackson took a few minutes to ask some questions of his own. Schmalensee had claimed that Microsoft doesn't use predatory pricing because it doesn't flood the market with free versions of Windows to to put competitors out of business. Jackson asked the economist why Microsoft's actions weren't exactly that, pointing out the price of Internet Explorer as a possible example of market flooding. Schmalensee answered that question with the typical explanation of how IE integration increases Windows sales and brings people in to Microsoft's Internet properties.
Schmalensee was looking pretty good, until government attorney David Boies began his own cross-examination. Boies began by getting the witness to admit that computer operating systems will be important for at least another ten years, and that there is no viable alternative to Windows. That finished, Boies moved on to ask the witness about money Microsoft has paid him over the last few years to serve as an "analyst." Schmalensee replied that he wasn't sure exactly how much he has been paid, but after more questions finally admitted to making over $100,000 a year for seven years in a row. He also confessed to making $200,000 a year for the last two years, and eventually mentioned that he received a $300,000 bonus last year from the consulting company that pays him to work with Microsoft.
With Schmalensee's conflict of interest exposed, Boies moved in for the kill. The government attorney compared two charts, both prepared by Schmalensee's consulting company, showing Web browser market share versus the number of computers purchased. The charts - as used by the witness various times during the trial - showed more people receiving Netscape products with their computer than had actually bought computers in a year. Eliminating any shred of credibility Schmalensee had left, Boies finally forced him to admit that he had done no study, had no projections of numbers, and had no knowledge about the authors or details of the technologies he cited in his testimony.
Following that bloodbath, judge Jackson requested that lawyers from both sides return to court for a 'fact finding session on August 10 and for closing arguments in the 21-week trial on September 21, almost two years after the original government lawsuit. he then called the court into recess. After the closing arguments Jackson is expected to rule against Microsoft, then issue a judgment and the possible punishment. But that could take until next spring, by which time Microsoft could own the government anyway.

During the PCExpo Conference in New York last month, Microsoft made a big ado about nothing with an announcement that it plans to require the hundreds of Web sites where it advertises to meet certain consumer privacy standards. Chief Operating Office Bob Herbold said that beginning January 1 2000, Microsoft will review the privacy policies of its 750+ US-based advertising sites and stop buying ads on the ones that don't meet strict guidelines developed by the government.
For sites that don't have a policy yet, Herbold promoted the privacy Wizard, a free tool available from several Microsoft sites. He also mentioned that Microsoft plans to review its own privacy policies, and build a feature into future versions of Internet Explorer that would allow Web surfers to block sites without adequate privacy policies. However, the overpaid executive failed to mention that a privacy _policy_ is useless fluff without some way to actually protect user privacy. He also, of course, never mentioned that Microsoft's Web browser and most of its Internet servers are dangerously insecure, risking the privacy of everyone who uses them.

To protect children from violent computer games - many of which it now produces - Microsoft has reportedly added a feature to the consumer version of Windows 2000 allowing parents to block games with certain content ratings. Game companies currently rate their games under a voluntary system, but the ratings are only shown on the box. Microsoft is helping those companies encrypt ratings inside their games, so the forthcoming Windows Game Manager can prevent younger users from playing violent or explicit programs. Unfortunately, most parents will have to ask their children how to implement the feature.

A San Francisco court has denied Microsoft's request for a new hearing on a decision expanding the class of 'temporary' workers eligible for back benefits. The ruling was part of a class action suit filed against Microsoft by a group of former "permatemps" who were denied benefits [see NewsSource, Nov. 23 '98] while working inside the company for years.
Late last month Microsoft admitted to yet another bug in Windows 98 - this one potentially making a computer unbootable. This new bug is reportedly caused by the System File Checker Tool, which erroneously replaces a crucial system component with a corrupted file. Microsoft says that the problem can be corrected after it occurs with the Windows 98 bootdisk, but made no promises about workarounds or patches.

_{Another New Era
Users Say Life OK Without Microsoft
MS proposes browser 'ballot' for PCs}