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The hearing was called by Senator Orrin Hatch (R-Utah), chairman of the Senate Judiciary Committee. In listening to the hearing, Hatch made it clear in his statements that he believed Microsoft was a monopoly in the software industry and that it should be regulated more closely. Among those attending the hearing were Netscape CEO Jim Barksdale, Dell CEO Michael Dell, Microsoft CEO Bill Gates, and Sun CEO Scott McNealy. Is he right? Let's look at the facts.
Microsoft owns 85 percent of the operating systems business. Windows is also preloaded onto 90 percent of computer systems.
So what does this mean? Is Microsoft a monopoly in the software business just because it owns the OS market? In one of the more dramatic scenes of the hearing, Jim Barksdale asked panel members how many members used computers with an Intel-based CPU. Half the members raised their hands. Barksdale then asked how many members used an OS made by a Microsoft competitor. No one raised their hands.
"That's a monopoly," Barksdale quipped.
Bill Gates, however, countered by telling how everyone thought IBM was a monopoly, and how Microsoft overtook it as the leader. "People who said that any start-up who tried to take on this colossus was doomed to failure. But the people who feared IBM were wrong."
In more prepared comments, Gates continued on why he thought Microsoft was not a monopoly. "Microsoft does not have monopoly power in the business of developing and licensing computer operating software. As you know, a monopolist by definition is a company that has the ability to restrict entry by new firms and unilaterally control price."
When asked by Senator Hatch whether he thought Microsoft was a monopoly, Gates cleverly dodged the question. Gates instead spoke about how other companies could easily displace Microsoft's position as the most powerful software company.
"Outside of this room and even members of this panel, you will hear how their products will replace Windows, how Java will supersede Windows, how the browser will turn into an operating system . . .You'll hear from IBM on its plans for operating systems, so there is competition." When Hatch reworded the question to try to get a better answer, Gates cleverly answered, "I'm not going to say anything about legal issues. I'm not an expert."
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