Executive Summary
A new wrinkle in the Microsoft antitrust trial is the separate track taken by nine states who have dissented from the settlement reached by the Department of Justice and nine other states. While these nine states have dropped the proposal to break-up Microsoft, they have instead proposed a remedy that pokes enough holes in the Windows platform to suggest the Swiss cheese analogy. One key element of their proposed remedy relates to the replacement of middleware components of the Windows operating system. These states would have Microsoft completely remove its middleware code from Windows at the request of a computer manufacturer or third-party licensee. The effects of this proposed remedy, if it were implemented, would be felt by many in the information technology (IT) industry–software developers, service firms, resellers, business users and consumers.
The aim of this report is to assess the direct impact on software companies who create, market, and support applications that already run on Windows. The impact is significant. Tens of billions of dollars in extra costs over the first three years. PC software producers would incur as much as $30 billion to $80 billion over the next three years in development, testing, marketing, and support costs. This extra cost is due to software developers having to adapt their software to new middleware they might not prefer because there is no safety net middleware they can always count on being available to all Windows computer users.
Consumers and producers will pay the price. Software companies would deal with increased costs in two ways: pass costs along to consumers and business users in the form of higher prices; or elect not to support some middleware products. The effects of reduced margins and fragmented markets will drive some software producers to exit the business altogether, particularly the small producers. Consumers pay either way–higher prices, fewer choices of software, less certainty that software they buy will run properly.
No balance of costs and benefits. The magnitude of these costs and disruptions should be seen in relation to the settlement agreed upon by the Department of Justice, nine other states and Microsoft. That settlement also allows OEMs and users to remove any Microsoft middleware from the desktop and replace it with competing middleware products. The settlement does not, however, require that the actual code be removed. This allows a ‘safety net’ for developers who, if they so choose, can rely on the presence of “default” middleware from Microsoft.