Issue # 185, November, 1998  

In the End, It's All Marketing

By Stephen Lawton

   Is success a dirty word?  Whether you love or hate Microsoft, the company’s latest escapades with the Department of Justice demonstrate that from the government’s point of view, any company’s ability to be dominant in its market all comes down to marketing.
    We’ve seen this before: The federal government steps in to determine if a successful company is becoming too successful. The question we all should be asking is: Should successful companies be penalized? Just ask AT&T or IBM.  In the Roaring ‘70s and ‘80s, AT&T was growing on all fronts.  Like IBM before it, it saw growth in new markets and tried to exploit it. And like IBM, Justice took it down, claiming antitrust violations.  (In IBM’s case, the antitrust stranglehold was in place for 40 years.)
    It has been almost 15 years since the January 1, 1984, divestiture resulting from  Federal Judge Harold Green’s 1982 consent order  forced AT&T out of the local service market in order to allow it to enter the computer industry. (Bell System assets had grown to $155 billion by that time, more than Microsoft’s current $257 billion market capitalization if figured in 1984 dollars.)
    The rationale of the divestiture was that smaller, local phone companies could lead to competition. Letting an unfettered AT&T get into the computer and data business, it was reasoned further, would just tighten its clamp on the perceived monopoly the Bell System held. The value of that decision still is debated. One of the newer competitors in long distance, MCI Corp., was itself forced to divest of some of its Internet business recently when WorldCom acquired it. (Ironically, it had been a complaint filed by the upstart MCI in the 1980s that triggered the historic antitrust case against AT&T in the first place.)
   After the 1984 divestiture, the Regional Bell Operating Companies (RBOCs) were spun off of AT&T to serve these local markets and generate competition.  Now, the RBOCs are joining forces and becoming Big Bells again.  Just look at the Pacific Telesis/Southwestern Bell and Bell Atlantic/NYNEX mergers and you’ll see the flaw in Judge Green’s plan: Marketing drives growth.
    Personally, I like Netscape Communicator.  Even though I own Internet Explorer, I won’t use it.  I voted with my computer and so can you. Just because a vendor gives you IE, it doesn’t mean you have to use it.
    There are various allegations against Microsoft,  but it all gets back to the company being vilified because it did a better job marketing than anyone else. Maybe Microsoft broke the law when it required that PC vendors only ship IE. But did Microsoft break the law by incorporating IE into Windows?  From where I sit, I hope not.
    I don’t want Washington to tell technology companies what they can and cannot put into their products. If Microsoft was wrong in some of its dealings, fine, but it is dangerous for the industry as a whole to use government agencies to do what sales and marketing cannot.
    Washington just doesn’t know when to stop.  The FTC is now probing Cisco Systems and Intel was a target as well.  Where does it end?  There is a lesson to be learned: Marketing is Mission Critical!

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