The US Government returned to a back-to-basics strategy in the Microsoft antitrust case, attacking Windows operating system pricing while reinforcing its argument that competition in the operating system market is impossible.
The government's opportunity to examine some of the core reasons behind its antitrust lawsuit came at the end yesterday of Microsoft's cross-examination of government witness Frederick Warren-Boulton.
The economist will be followed by James Gosling, vice president of Sun Microsystems, who is now expected to take the witness stand today.
Warren-Boulton, who seemed a little worn-out after four days of cross-examination, was given the opportunity during the government's redirect to outline the reasons why the software giant is a monopoly.
"Microsoft can raise the price of its operating system without much concern of falloff" by personal computer manufacturers, said Warren-Boulton.
Pointing to an analysis of operating system pricing conducted by Microsoft, Warren-Boulton said that from 1990 to 1996, the operating system's share of the total computer system's cost increased from 0.5 per cent to 2.5 per cent, a five-fold increase, he said. In the past two years, that share has increased to 5 per cent.
Warren-Boulton pointed to those increases as evidence of Microsoft's growing monopoly power, but Microsoft spokesman Mark Murray said, during a break, that the government was "essentially lying with statistics".
"Microsoft operating system share is still a very small part of the personal computer price," said Murray.
He contrasted that with Intel's microprocessor prices as a share of the total cost of a personal computer, which increased from 3.1 per cent in 1990 to 11.8 per cent by 1996, said Murray, citing statistics from the same Microsoft study.
Murray also said it wasn't fair to compare the cost of developing hardware to an operating system.
"How much innovation has occurred in a keyboard over the past eight years?" said Murray.
Operating system cost aside, Warren-Boulton said the barriers for potential rival operating systems makers "are simply enormous", because of inability to woo application developers. Microsoft has also used its operating system strength to block competitors, he said.
The government has argued throughout the trial, that Microsoft feared Netscape's browser because it was a potential vehicle for the development of a new operating system.
In its questioning of Warren-Boulton, the government played an excerpt of the deposition of James Allchin, Microsoft's senior vice president of personal and business systems, in which he described the threat posed by Netscape. "As far as I'm concerned they were a complete competitor to the operating system," he said. Allchin is on Microsoft's list of witnesses.
Before Microsoft finished with its cross-examination of Warren-Boulton, Microsoft attorney Michael Lacovara asked him if the America Online acquisition of Netscape would increase competition in the browser market.
"I wouldn't bet on it if I were a betting man,'' said Warren-Boulton.