9 February 1998 Source: http://www.access.gpo.gov/su_docs/aces/aces140.html ----------------------------------------------------------------------- [Congressional Record: February 5, 1998 (Senate)] [Page S413-S418] From the Congressional Record Online via GPO Access [wais.access.gpo.gov] [DOCID:cr05fe98-129] MICROSOFT Mr. GORTON. Mr. President, while the Senate is conducting its morning business, a conference is being held in Georgetown by the Progress & Freedom Foundation (PFF) on an issue that has gotten a great deal of attention over the past few weeks. From the conference title-- Competition, Convergence and the Microsoft Monopoly--one might be deceived into believing these are frightening times for American consumers. Any fears about the success of Microsoft isn't coming from those who buy Microsoft products, but from frustrated competitors. While I don't dismiss the concerns expressed by anti-Microsoft factions, their arguments certainly lack force when consumers appear to be so completely uninterested in this tale. In fact, that's the untold story in the drama of the past several months--what does the consumer think of all this? How are American consumers being impacted? These questions are appropriate when you consider that the anti-trust laws of this country came into being to encourage competition and to protect consumers, not to settle bickering among business competitors. Unfortunately, a lot of words have been printed and broadcast on this subject, but we've hardly heard a peep from the people who matter most--the consumers. This concerns me precisely because it appears that so many people [[Page S414]] participating in this dispute have already decided who gets to wear the black hat, and who the white. At this morning's event my colleague from Utah, Senator Hatch, who chairs the very committee that exercises jurisdiction over the antitrust laws, spoke to the PFF conference about the Microsoft dispute. Normally, I don't keep track of where my colleagues make speeches and what they speak about, but because Senator Hatch has been quoted in the news media as taking a very hard anti-Microsoft line, I feel compelled to share some of his statements with my colleagues and rebut some of the criticism that he, and other Microsoft critics, have tossed out in the past several weeks about one of America's most visible, and successful, companies. On Jan. 25th, Senator Hatch spoke at length to the San Jose Mercury News about Microsoft and his competitors, and I was surprised by the tone of his remarks. The newspaper quotes Senator Hatch as saying, ``if Microsoft has engaged in driving out competition, and I think it has-- most everybody who's looked at it carefully believes it has--and takes control of (Internet standards), they're going to exercise a tremendous amount of control over Internet content and commerce.'' Senator Hatch goes on to say, ``if they're using anticompetitive practices to achieve that, it's wrong--and we have to do something about it.'' In light of Senator Hatch's comments, I am concerned about how Microsoft is treated on Capitol Hill. Fortunately, Senator Hatch has promised that the Judiciary Committee has no intention of interfering with [the Microsoft litigation] and as our examination goes forward, we will work in a bipartisan manner to ensure that it continues to be fair and balanced. (Feb. 3 letter to Gorton/Murray) I appreciate this statement, but I must admit it concerns me when he speaks at a conference that refers to Microsoft as a ``monopoly.'' Having said that, I would like to begin my comments on the Microsoft investigation by making a couple of points: First, the question of whether the company has violated antitrust laws is something of an abstract question that has been posed, not by American consumers, but by Microsoft's competitors. I believe that to be the key of this entire discussion, and why I feel so strongly that Microsoft is being treated unfairly. This isn't an effort led by those who purchase software products . . . if it were, you can be sure that my attitude would be much different . . . this fight was started by those who must compete with Microsoft, which, in my opinion, makes it very hard for those individuals and companies to make an argument that is not completely driven by their self-interest. Let's remember why we have anti-trust laws in this country--these laws weren't written to preserve unsuccessful competitors; they were written to encourage competition, and thereby protect consumers. And to date, I haven't seen one bit of evidence to support the theory that consumers are being hurt by Microsoft's success, or the success of any other company in the software industry. Second, as a former state attorney general, I support government enforcement of antitrust laws, but I cannot support the DOJ's attempts to restrict Microsoft's ability to produce and market the full-featured products its customers demand. Product design decisions should be made by software developers responding to consumer demand in the marketplace, not by governmental agencies. And so on behalf of the American consumer, indeed the American economy, I'd like to review a few facts that we simply should not overlook today. From 1990 to 1996, the number of software companies in the United States grew 81 percent, from 24,000 to 44,000 companies. During the same period, employment in the American software industry grew 70 percent, to more than 600,000 jobs today. The industry generated direct wages of more than $36 billion in 1996, and another $83 billion in related sectors of the economy. It generated $7.2 billion in taxes paid to federal and state governments, and another $7.9 billion through the ``ripple'' effect. Venture capital investment in new technology companies is at an all time high--$2.4 billion invested last year alone. Prices for personal computer hardware and software are constantly falling. Where a single Microsoft application such as Microsoft Word cost $399 in 1990, today consumers can acquire all of Microsoft Office (which includes word processing, spreadsheet, presentations, scheduling and other functionality) for just $499 at retail. If Microsoft's competitors are right, how could all of that success taken place? Wouldn't logic tell us that if a ``Microsoft Monopoly'' actually existed, prices would be higher, job growth would be lower, and venture capital investment would be next to nothing? Yet, the facts show the opposite course. Also, I think it's important to remind ourselves that all of these accomplishments took place without government regulation or interference. Let's review that again: Competition in the American software industry is not only healthy but vigorous. America leads the world. Innovation is at an all-time high. Employment is flourishing. Prices continue to fall for consumers and businesses alike. Productivity is skyrocketing. And barriers to entry for any company or individual that wants to compete in this industry are low. The principal assets required to create software are human intelligence, creativity and a willingness to assume entrepreneurial risk. All of the hallmarks of a thriving, healthy industry are in place in America's software industry. Let's return now to this question--what is the basic goal of antitrust law in America? I believe that the basic goal of our anti-trust laws is to promote competition, thereby insuring that consumers benefit from the widespread availability of goods and services at fair prices. Often competition is vigorous, but the fact that certain companies perform better than others is no reason to doubt that consumers benefit greatly from their success. As many courts have recognized, all companies should strive to do as much business as they can, even if that means taking business away from rivals, because it is that quest that causes the creation of new and better products offered to consumers at attractive prices. So, why are a handful of Microsoft's competitors so successful at scaring up government investigations, public policy debates and media scrutiny? One might argue that all of these incredible statistics that I've just reviewed are somehow skewed because Microsoft is really the only beneficiary. In other words, all of the benefits accrue to Microsoft. Well, that's just wrong. Once again, the facts tell another story: The top 20 companies in the industry account for only 42% of the total revenues from packaged software sales--demonstrating that the software industry is highly competitive and decentralized. Microsoft represents less than 4% of total worldwide software industry revenues. In 1996, total software industry revenues were $250 billion; Microsoft's portion was less than $10 billion. How can there be a ``Microsoft Monopoly'' if Microsoft accounts for less than 4% of industry revenues? If such a monopoly existed, shouldn't that percentage be more like 60%, 70%, 80% or higher? But what about Microsoft's dominance in the PC software space? Well, a few more facts: In online services, Microsoft represents only 9.8 percent of the online services sector. America Online has 75 percent. Database software: Microsoft represents only 6 percent of the database software sector, compared to Oracle's 30 percent share. E-mail software: Microsoft represents only 14 percent of e-mail software revenues, compared to 43 percent for IBM/Lotus. Server operating systems: Microsoft represents only 27 percent of server software revenues, compared to 41 percent for Novell. Again, where is the monopoly? Percentages of 9.8, 6, 14 and 27 hardly sound like monolopies to me. So we're still left to ponder, why the fuss over Microsoft, given all of this good news? This is the question so many in the media are striving to answer. The New Republic recently attributed it to techno- angst--society's [[Page S415]] anxiety about the Information Age and its desire to focus that angst on someone or some company. I think a more plausible answer is a coordinated PR and lobbying campaign by a handful of Microsoft's competitors. Two weeks ago, the author and management guru James Moore wrote in The New York Times: The courtroom drama played out in Washington in recent weeks concealed what was happening backstage: a small number of companies that compete with Microsoft have managed to make the Federal Government an unwitting tool of their narrow competitive objectives. These sorts of unholy alliances almost always lead to bad policy. If users are better served, if the cost of software is reduced and if new layers of information-industry innovation are built, a strong argument can be made that the public good is being achieved without Government intervention. The public good is being achieved without Government intervention. This cannot be overemphasized. The Progress and Freedom Foundation has played an important role in developing intelligent public policy with an eye toward limiting the role of government in markets. In 1995, PFF published a major study on the need to replace the FCC and substantially deregulate the telecommunications marketplace. Today, PFF is conducting a major project designed to limit government interference in the market for digital broadband networks. I applaud PFF's efforts on behalf of the free market in those industries, and am somewhat mystified by the organization's apparent inconsistency with regard to Microsoft and the software industry. Based on the organization's past, I simply want to encourage the Progress and Freedom Foundation to remain steadfast in its belief in the American marketplace. Now, I'd like to turn for a moment to addressing some of what I will call the myths out there about Microsoft. I think it's important that we deal with some of the less scholarly thinking and ideas up front. Myth #1: Microsoft is somehow going to control access and commerce on the Internet. I was amused to see a press release earlier this week from the New York Attorney General's Office making this claim. It's almost as though the PR campaign being championed by several Microsoft competitors who have decided these buzzwords have the most media appeal. Anyone who goes out onto the Internet to find the world of knowledge and information available there knows that no one will ever control access and commerce on the Internet. Such a thought is as laughable as suggesting one company will control all commerce and information in the world. The Internet is a vast information source that will continue to grow and expand. No company will ever represent more than a tiny fraction of all the commerce and all the content available on the Internet. Myth #2: Some companies are afraid to come forward with complaints about Microsoft because they are afraid that Microsoft will use its dominance in the marketplace to punish them. My colleague, the chairman of the Judiciary Committee, Senator Hatch, has made this charge himself in interviews with the news media. This is a serious accusation but one that is also baseless. Microsoft has gone so far as to give the Justice Department a letter that it can present to anyone and everyone doing business with the company encouraging them to cooperate with the DOJ on its investigation. Microsoft has been extremely cooperative for years with the DOJ. And it would be out of character for Microsoft--a company that values its partners--to make this an issue with them. Myth #3: Microsoft's license agreements with Internet Service Providers unfairly force ISPs to promote only Internet Explorer, and prohibit ISPs from even mentioning the existence of Netscape Navigator. Like PC manufacturers, ISPs know and understand their customers. They provide their customers with choice--whether it's Internet Explorer, Navigator or some other product. Microsoft has no exclusive arrangements with ISPs. This is a non-issue. Myth #4: Microsoft is entering into proprietary agreements with Content Providers to create popular websites that can only be viewed using Microsoft's browser. Let me be absolutely clear. A consumer can use any browser he or she wants to view any material on the Internet. A content provider may choose to take advantage of technology available in either Internet Explorer or Navigator to make their content even more compelling. Content providers like Warner Brothers want to reach the most customers. They aren't looking for exclusionary technology. They are looking for the best technology to serve their customers. Right now Warner Brothers believes that Microsoft has the best technology. There are other content providers that believe Netscape has the best technology. That's what competition is all about. This is similar to saying that manufacturers of VHS videocassette players entered into proprietary deals with Hollywood studios to force their movies on VHS tapes rather than Beta tapes. Just as VHS and Beta were competing standards, so too are Internet Explorer and Netscape Navigator. May the best technology win. Myth #5: The Justice Department is working to restore choice for consumers. This is disingenuous at best. Consumers have always had choice. Netscape and thousands of other software programs run wonderfully on Microsoft Windows. In fact, the great untold story is how Microsoft spends more than $65 million and 1,000 Microsoft employees to work with its competitors to build great software applications that run on Windows. It's important to understand these myths. Sound public policy must be based in fact, not competitive rhetoric. These are exciting times for American consumers and for American business. Microsoft's business model, which is focused on rapid product development, broad distribution at low prices and close collaboration with hardware and software vendors, is helping to drive demand through the high technology sector. We are seeing upgrades to telecommunications networks--telephone, cable, satellite and wireless-- the introduction of new types of devices such as hand held computers and automobile PCS--and the creation of innovative new software to make these networks and devices improve the lives of all consumers. New technologies and new ideas are being introduced at a dizzying pace--led largely by innovative and highly competitive American companies. I've spoken today about the American consumer and the American software industry. I'd like to conclude by talking a little about Microsoft. You can hardly talk about innovation and competition without focusing on Microsoft. It's founder, Bill Gates, is one of the true visionaries of the Information Age and his company has produced technology that will forever change the way we work, play and think. I have enjoyed watching this phenomenal man and his company for many years. And over those years, I have seen Microsoft remain committed to four very important business principles that have guided the company since its founding: 1. Microsoft builds software that improves the quality of people's lives. Bill Gates' vision of Information at Your Fingertips brings businesses closer to their customers, voters closer to their elected officials, doctors closer to their patients and teachers closer to their students. 2. Microsoft listens closely to its customers and focuses on how it can do a better job. If you want to know the true secret to Microsoft's success, look at its intense focus on incorporating customer feedback into its products. 3. Microsoft believes that innovation is at the heart of its future. Microsoft will spend more than $2 billion this year on research and development. More than 16 percent of its revenues are dedicated to R&D. Its competitors, Sun and Oracle will spend about 8 percent of revenues on R&D. 4. Microsoft partners with many companies, large and small, who share these principles. Microsoft's thousands of partners are in every state in America--independent software vendors who build great software products for the Windows operating system, PC manufacturers, solution providers who support and implement Microsoft technology solutions and many other partners. In conclusion, I believe that a review of the facts shows that the American [[Page S416]] software industry is healthy, vigorous, innovative and continually improving the lives of American consumers. Microsoft is one of many aggressive and innovative companies in this industry. Its leadership is an asset for the nation. Its leadership is also not guaranteed. In any dynamic, innovative industry such as software, your position in the market is only as strong as your last product release. The competitive threats to Microsoft are real. As PFF, the participants at its conference, and many of my colleagues know all too well, it is the marketplace, not government regulation that will ensure continued innovation and consumer benefits. Mr. HATCH. Mr. President, I ask unanimous consent that an address I gave to the Progress and Freedom Foundation be printed in the Record. There being no objection, the address was ordered to be printed in the Record, as follows: Address of Sen. Orrin G. Hatch before the Progress and Freedom Foundation February 5, 1998 Antitrust in the Digital Age Good morning. It is a true pleasure to be with you this ` morning and to be included in such a distinguished group of leading economic and antitrust thinkers. I know that, given the early hour, some of you no doubt are looking for some eye-opening comments. Well, I hate to disappoint, but, let's not kid ourselves folks, this is antitrust we're talking about, so I hope you've had your coffee. Seriously, though, I would like to applaud the Progress and Freedom Foundation for convening this symposium, as well as those who have focused their intellectual energies on the topics to be discussed today. It is, I believe, no overstatement to say that the so- called Digital Revolution is one of the most important economic developments of our age, one which promises to fundamentally change our economy, our business, and our daily lives. Just when I have finally mastered how to set the clock on my VCR, I discover that it won't be long before I'll be watching movies off the Internet, not my VCR. Now I'm really beginning to understand that ``virtual reality'' means something more than simply getting up in the morning. These rapid changes present numerous challenges to policymakers who are seeking to understand what, if any, role the government should play both in the transition to our new digital economy and in the new economy itself. These changes present challenges to policymakers who are seeking to ensure that, where there truly is a productive role for government, this role is both limited and effective. While of course the Digital Revolution impacts numerous policy areas, I believe that, ranking high among those is the task of understanding the proper role of antitrust in high- technology markets. I promise to keep my comments brief this morning, but thought I would spend a few minutes discussing why I believe it is important for antitrust policymakers, law enforcers, and intellectuals to engage in a serious examination of market power and structure, and the proper role for antitrust enforcement, in the Digital Age. Make no mistake about it--these are difficult issues. Anyone who suggests that the answers are easy cannot be taking the issues very seriously. But anyone who suggests that these are not serious policy issues, worthy of debate and study, has, for one reason or another, chosen to ignore reality. But, the difficulty of the questions should not deter us from seeking answers. And, especially given the breathtaking pace by which technology is advancing, it is imperative that we search all the more diligently and assertively. I. Antitrust and Free Markets While there has always been, and probably will always be, considerable debate about the proper role of antitrust enforcement, it is important to note here something that just about everybody agrees with: some degree of antitrust enforcement is important to protecting our free market system and the consumers that system is meant to benefit. Thus, most who, like myself, trumpet the free enterprise system, also recognize that proper antitrust enforcement plays an important role in protecting free markets. Let me repeat that. Proper antitrust enforcement plays an important role in protecting free markets. From Adam Smith to Robert Bork, free market, free- enterprise proponents have long recognized as much. So let me debunk the myth that economic conservatives do not believe in antitrust. To the contrary, we believe strongly in antitrust--so long as the role of antitrust is understood properly and not overextended. Properly conceived, the role of our antitrust laws is to maximize consumer welfare--allowing the marketplace to work its will so that the products consumers want can be produced in an efficient fashion and offered at competitive prices. The basic premise is that antitrust protects ``competition'' in the marketplace, and that a competitive marketplace enhances consumer welfare. In a properly functioning competitive market, consumer choice dictates which products will be produced and sold, and competition among firms determines who will make them and at what price. Consumer welfare is maximized, and society's ``pie'' is larger. At the same time, though, our society and our antitrust laws recognize that markets will not always operate freely and achieve their objective of maximizing consumer welfare. The reality is that, in some circumstances, private market power can distort the workings of the marketplace and, as a consequence, can hurt consumer welfare by raising prices, restricting consumer choice, or stifling innovation. This is where antitrust steps in. As Judge Bork has written, proper antitrust enforcement actually ``increase[s] collective wealth by requiring that any lawful products . . . be produced and sold under conditions most favorable to consumers . . .. The law's mission is to preserve, improve, and reinforce the powerful economic mechanisms that compel businesses to respond to consumers.'' That's an important point--preserving ``economic mechanisms that compel businesses to respond to consumers.'' [The Antitrust Paradox at 91 (1993).] The $64,000 question, though--or, perhaps in today's context I should say the $300 billion question--lies in defining what actually injures consumer welfare, calling for antitrust enforcement. For it is not enough to say that any reduction in the amount of rivalry in a particular industry reduces competition, injures consumers, and should be stopped by antitrust laws. The very nature of competition and capitalism is for firms to beat each other in the marketplace. While this process--competition--certainly benefits consumers, its natural outcome is that the firms who succeed do so at the expense of other firms. [See id. at 49.] Antitrust law certainly cannot be about punishing winners or protecting losers. The goal is not simply to identify practices that reduce competition or rivalry. Rather, it is to identify when the exercise of market power impedes markets from operating freely and, as a consequence, hurts consumers. Where such situations can be identified, antitrust has the additional burden of identifying effective remedies that actually benefit consumers and are not more costly than the so-called anticompetitive practices identified in the first place. This sounds pretty simple, but it is not, especially when you are dealing with highly complex, fast-moving marketplaces such as high technology. But it is my hope that those participating in this symposium today will help those of us in policymaking or enforcement positions arrive at the right answers. For getting the answers right is, I would argue, more important now than ever, especially with respect to these markets which will be the key to our economy for years to come. II. The Importance of Antitrust to the Digital Revolution The stakes are high, because ill advised antitrust policy, whether it is overly aggressive or overly timid, could have drastic consequences for the future of our economy. I would like to spend the rest of my time this morning explaining why I think understanding and implementing appropriate antitrust policy for the digital marketplace is a singularly important policy issue. 1. First is the very simple fact that high technology represents the most important sector of our economy. High technology is the single largest industry in the United States, leading all other sectors in terms of sales, employment, exports, and research and development. [American Electronics Association. ``Cybernation,'' 1997.] Perhaps more importantly, high technology is the key to the development of our future economy. Not only will technology continue to be one of the driving forces behind our economy's growth, but it also will drive the development of the Internet, the ``Information Highway,'' which, by all accounts, will fundamentally alter the way we do business. Even Congress, which has traditionally been an institution of Luddites, is getting into the swing of things. Communication and accountability to our constituents is much improved by web sites and e-mail. Although, come to think of it . . . we may want to rethink this e-mail thing. Now we get feedback instantly--not even a grace period. The future direction of the Internet will be shaped in no small part by events occurring in today's marketplace. A handful of developments in today's marketplace could, I believe, have tremendous impact on the Internet, electronic commerce, and information technology as a whole, for years to come. 2. Which brings me to my second, somewhat related reason for suggesting that antitrust enforcement in high technology is a vitally important policy issue. We are currently in the midst of important structural shifts in the computing world. Given the unique nature of high technology markets, it is with respect to precisely such technological paradigm shifts that healthy competition and effective antitrust policy is most important. Allow me a moment to elaborate on this point, which I believe is a fundamental and important one. As many economists and capitalists alike have come to recognize--including, I might note, many of today's participants, and software industry leaders such as Bill Gates--the economic dynamics in so-called ``network'' markets such as the software industry often allow individual firms to garner unusually large market shares in particular segments. Most who have studied such markets closely, agree that the cyclical effects of network [[Page S417]] effects or increasing returns can translate early market leads into rather large market dominance, if not de facto monopolies, as well as a significant degree of installed base lock-in. This in itself is not anti-competitive when it results from proper market behavior. While lock-in effects and single firm dominance of particular sectors certainly render a market less than competitive, and consequently has costs in terms of consumer welfare, it also produces an important positive effect. When one firm dominates the market for a product which serves as a platform--a product to which other software developers will write their programs--that firm creates a de facto standard, a uniform platform. Software developers thus are not faced with the cost, in terms of time and resources, to develop applications that run across a variety of platforms. This can lead to significant boosts in productivity and innovation. Indeed, this is precisely what we have seen with respect to Microsoft's successful establishment of the Windows monopoly, which, by creating a uniform platform for software developers, has had a tremendous effect in the recent boom in software applications and the software industry generally. Even those who are concerned about Microsoft's exercise of its vast market power must enter this efficiency gain in the ``plus'' column of their consumer welfare calculation. The fact of the matter is that Microsoft and the success of Windows has been an important ingredient in the innovation and wealth creation our software industry has produced over the past decade or so. So, if a single firm's domination of a particular sector at a particular point in time might be the result of perfectly rational market behavior, and indeed may have some economic benefits, where do we go from here? Does this mean that antitrust is useless, irrelevant, or even counterproductive in high technology markets? To some extent, perhaps. On balance, the antitrust machinery in Washington, D.C. probably shouldn't concern itself with every technology market which, at a particular point in time, is dominated by a particular firm to an unusual, even unhealthy extent. Where antitrust policy should focus, I would propose (with a large footnote to the Judiciary Committee testimony of Professor Joseph Farrell, and other economists who have studied these markets), is on the transition from one technology to the next--on so-called paradigm or structural shifts in computing. While it may be likely and even, to a degree, useful, to have a particular firm dominate a particular segment at any point in time, it is dangerous, unhealthy, and harmful to innovation and consumer welfare where that firm can exploit its existing monopoly to prevent new competitors with innovative, paradigm shifting technologies, from ever having a fair shot at winning and becoming the new market leader or de facto standard. This is especially the case where a single firm exercises predatory market power to prevent healthy competition over a series of structural computing shifts. Where this is so, one would imagine that investors and innovators would find other things to do with their time and money than to try to compete with the entrenched firm to establish an important new technology. Innovation is chilled, and the consumer suffers. The critical question, then, is how a dominant or monopoly firm exercises its market power, even if fairly and naturally obtained, with respect to the new guy that comes down the pike offering an innovative, potentially paradigm shifting technology. Does this new firm, offering a new technology that may compete with, replace or otherwise threaten the old firm's entrenched monopoly, have a legitimate opportunity to compete in the marketplace? To borrow a phrase recently attributed to Professor Carl Shapiro, do innovative start-ups get a ``market test,'' or are they ``killed in the crib before they get a chance to become a core threat?'' [Steve Lohr with John Markoff, ``Why Microsoft is Taking a Hard Line with the Government?'' The New York Times, January 12, 1998 at D1.] In high-technology markets displaying a high degree of single-firm dominance, this is perhaps the most important question for antitrust policymakers and enforcers: To what extent are innovators who offer potentially fundamental changes to the nature of computing given a fair ``market test,'' and just what practices by the entrenched firm should be considered anticompetitive or predatory efforts to foreclose the opportunity for such a genuine market test? I believe this is precisely the question--or one of the questions--presented by Microsoft today and is one of the reasons why Microsoft in particular inescapably invites scrutiny in the course of assessing competition policy in this digital age. Of course, while antitrust policy in the Digital Age encompasses more than scrutiny of a particular firm, the fact remains that Microsoft in particular does raise a handful of questions, given its dominance of the desktop, together with its admitted effort to coopt important paradigm shifts and, in the process, extend its dominance to a number of new markets. The Internet generally and, more specifically, the potential promise of browser software, and object-oriented, ``write once, run anywhere'' software, represent important and possibly critical developments for the computer industry. Both the possibility of a new, browser-based platform and interface, and the possibility of a programming language that is genuinely platform independent, able to interoperate with any type of operating system, could fundamentally change the nature of computing. Among other things, both of these developments, likely representing the next generation in computing, introduced a serious threat to Microsoft's desktop dominance. As we all now know, Microsoft has clearly come to recognize as much. Thus, with respect to both the so-called ``browser wars'' and the battle between Java (Sun's essentially open programming language) and ActiveX (Microsoft's proprietary alternative to Java), we see Microsoft in a fever pitched battle to control two potentially fundamental technological developments and to prevent new technologies, developed by other firms, from undercutting the current desktop monopoly Windows enjoys. I am confident that nobody from Microsoft would dispute this assertion. Nor should they. Microsoft has all the right in the world not to be asleep at the switch and allow a fundamental, structural technology shift from undermining its current dominance of the software market. Its shareholders no doubt would demand as much. At the same time, this is precisely where the practices of a currently dominant firm, such as Microsoft, must be scrutinized, and where the appropriate rules of the road must be clarified and enforced. Tying arrangements, free product offerings, licensing or marketing practices that are effectively exclusionary--these and other practices may be entirely appropriate in most instances. But the question that, in my view, must be addressed is whether such practices, when engaged in by an entrenched monopolist with respect to paradigm shifting innovations, have the predatory effect of foreclosing innovators from getting a fair market test. Where they do, I would suggest that we have a significant market imperfection which impedes innovation, and in the process hurts both the industry and the consumer. The questions that I believe law enforcers and policymakers must address are first, how to identify when particular practices have such an effect; and, second, whether our current antitrust regime adequately guides industry as well as the courts and the enforcers to reach the right answer in a timely fashion. These are some of the questions I plan to give close scrutiny in the coming months, and which I hope to learn more about from today's presenters and panelists. Answering these questions, and coming up with the proper policy and/or enforcement solutions, is more important now than ever. The market battles being waged today are likely to have significant consequences for the Digital Age tomorrow. 3. Which brings me to my third and final reason why I believe sound antitrust policy is so critically important to the Digital Age: because it could prove critical to the growth of a free and open Internet. Interfaces. In the proper hands, software interfaces are everything. To oversimplify somewhat grossly, software interfaces refer to certain critical external links or hooks in a software program that permit other programs to communicate, and therefore interoperate, with the first program. Because interfaces are the key to interoperability, and interoperability is the key to software markets, relentlessly aggressive, savvy companies with vast resources can be quite successful at translating the control of a critical interface into control of the markets on either side of the interface. And the ultimate interfaces are the interfaces to Internet access and content. Microsoft has made no secret of the fact that it has made dominating the Internet space a corporate priority. And I credit them for it. Any genuine free-marketeer, any genuine capitalist, must admire the efforts the company has recently taken to go after what Microsoft itself has called the huge ``pot of gold'' the Internet represents. Like many, I cannot help but admire and applaud Microsoft's drive to pursue this vision. Whether it be a no-holds barred approach to competing with alternative browser vendors, seeking to control Web software programming and tools markets with proprietary products, buying the intellectual property of WebTV, making large investments in the cable industry while vying to control the operating systems of cable set-top boxes, linking Internet content to the Windows desktop, or any other of a handful of aggressive steps to control the groundwells, plumbing and spigots of the Internet, one can hardly question Microsoft's ambition to dominate the Internet space, or their business savvy in getting there. Just how much control over the Internet Microsoft will exercise is anyone's guess, and I certainly do not pretend that I know the answer. But many certainly do believe that this is what Microsoft is out to achieve, in effect a proprietary Internet, and that the answer lies in the outcome of market battles which are being waged right now. For controlling the key Internet interfaces is a critical step to controlling much of the Internet itself. This, then, is my third reason for why properly calibrated, vigilant antitrust enforcement is all the more imperative today. In the end, the marketplace should be permitted to choose whether it wants a proprietary Internet. I think I know what the answer would be. But I can assure you that, if [[Page S418]] one company does exert such proprietary control over the Internet, and the Internet does in fact become a critical underlying medium for commerce and the dissemination of news and information, rest assured that we will be hearing calls from all corners for the heavy hand of government regulation--for a new ``Internet Commerce Commission.'' It seems far better to have antitrust enforcement today than heavy-handed regulation of the Internet tomorrow. So, let me suggest to those of you who abhor the regulatory state that you give this some thought. Vigilant and effective antitrust enforcement today is far preferable than the heavy hand of government regulation of the Internet tomorrow. III. Conclusion In closing, I would like to come back to what I said at the outset. These are difficult, but very important, policy issues. Because of what is at stake, effective and appropriate antitrust policy is critical to our digital future. Antitrust policy that errs on either side--be it too aggressive or too meek, could have serious consequences. But because of the uniqueness, and the complexity of high technology markets, discerning the proper role for antitrust requires some fairly hard-headed analysis. Those who dismissively say that technology is complicated stuff that changes like quicksand are in a sense correct. But, is the answer, as has been suggested by some politicians and other new-found friends of Microsoft here in Washington, simply to throw up our hands and move on to other, easier, and less sensitive issues? Hardly. Rather, let me suggest that the answer is to make sure that the rules of the road are the right ones, and that the referees do a good job enforcing them, when and where it is appropriate. Antitrust policymakers and enforcers should not shirk their duties just because the task is a hard one. I have a great degree of confidence that the current head of the Antitrust Department is up to the task, and, as Chairman of the Committee with antitrust and intellectual property jurisdiction, I plan to do what I can to ensure that the rules are being applied both fairly and effectively. We in Congress not only can, but in my view must, ask the questions and help ensure the right answers. Toward this end, I would like again to thank the Progress and Freedom Foundation, and those who have dedicated the time and intellectual effort to these difficult questions, for taking a very productive step in this process of understanding and implementing a sound, effective role for antitrust policy in the Digital Age. I expect that we all will learn a great deal from what I trust will be a vibrant and energetic discourse throughout the remainder of the day. Mr. GORTON. Mr. President, I want particularly to thank my friend from Nevada for agreeing to let me proceed. The PRESIDING OFFICER. Under a unanimous consent request, the Senator from Nevada is recognized for up to 15 minutes. Mr. REID. I say to my friend from Washington, it was a pleasure to yield that time and to listen to his statement, which was typically much like the Senator from Washington; it was very thorough and educational for me. Mr. President, I ask unanimous consent that following my statement, the Senator from California be recognized for 10 minutes. The PRESIDING OFFICER. Without objection, it is so ordered. ____________________