High-Tech's Starr Report

The consequences of a software culture war.

Virginia Postrel from the January 2000 issue

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But Web sites have not adopted Microsoft standards and excluded others; even Jackson does not expect them to. The acquisition of Netscape by America Online, the largest Internet service provider, further reduces the chances. As Jackson notes, "AOL was interested in keeping [Netscape's] Navigator alive in order to ensure that Microsoft did not gain total control over Internet standards."

The Internet has also become an important way to deliver new applications software, further eroding Microsoft's influence. Instead of software that comes in a box and runs on Windows-based machines, companies are selling software as specialized Web-based services. Microsoft still "controls the desktop" and influences PC vendors, but the effects of that control on consumers are diminishing.

Money is pouring into the software business, with start-ups at their highest valuations ever. According to PricewaterhouseCoopers, in the second quarter of 1999 "software and information" drew in $2.1 billion in venture capital, or 28 percent of total investments.

Meanwhile, hardware prices are plummeting. For desktop computers, this means Microsoft's license fees are a more significant portion of vendors' costs, making them more likely to squawk. Traditional PCs face competition from specialty products like Palm Pilots and from the servers that provide the nodes in computer networks. Microsoft's Windows CE hasn't done too well in the specialty-device market, and its Windows NT faces strong competition for server customers.

Among those competitors, the cheapest and most interesting is Linux, the "open source" operating system developed for free by hackers working worldwide. The system has about a third of the server market, nearly as much as NT, and its share is growing. Red Hat Inc., which sells a version of Linux for less than $50, went public in August, raising $83 million; on its opening day, the company's market capitalization shot to more than $3.4 billion. Today, Linux is mostly a server operating system--irrelevant in the judge's static view of the world--but it is slowly gaining a foothold in the desktop market.

Linux has become a high-profile weapon in the anti-Microsoft crusade. At stake is what Linux evangelist Eric Raymond calls a "quasi-political" question: "Will the Internet culture tolerate single-vendor monopolies on critical infrastructure or not?" The answer appears to be no.

There's a popular saying that the Internet interprets censorship as damage and routes around it. Desire and innovation will trump policy, the argument goes, as clever programmers circumvent controls. This may or may not be true of censorship--cyber-utopians tend to discount the physical terror of police states--but it may well be true of Microsoft's dominance. The profit motive is strong in Silicon Valley, but so is the desire to beat up the bad guys in Redmond. It's just too bad they got the lawyers involved.