Outdated Laws Can’t Keep Pace With Today’s Technology

Two stories have dominated the news this week: Microsoft and the stock market. Monday evening a federal judge ruled against Microsoft in a landmark antitrust lawsuit. Wall Street went on a wild ride Tuesday, after Monday’s record losses on the Nasdaq, the largest fluctuations in market value were recorded. This volatility has been attributed to a rumored interest rate hike by the Federal Reserve and to squeamishness with technology investments after the Microsoft judgment.

The immediate effect of the ruling should serve as a wake-up call to policymakers. Private markets often react unpredictably to government intervention.

One analysis that you might not have seen concludes that “century-old antitrust law [is] a clumsy fit in [an] era of rapid change.” The story explains that, in the two years since the antitrust lawsuit was brought against Microsoft, technology has beaten the government to justice. The original complaint was against Microsoft’s tactics in the “browser wars.” A year ago, Microsoft’s main competitor, Netscape, was purchased by AOL to create a $14 billion competitor. Today there are a variety of browsers, many available free.

Two other recent news stories shed light on the power of a fast-moving technology marketplace versus the rigid enforcement of laws created before the advent of the automobile. Last night the Associated Press reported that the software company Red Hat Inc. has expanded its agreement with Compaq Computers to distribute the latest version of its Linux operating system.

Again, the marketplace has beaten antitrust regulators to justice. After the initial government complaint began to lose credence, antitrust regulators expanded their case against Microsoft. The government complained that Microsoft bullied computer manufacturers into installing their Windows operating system. This week’s Red Hat-Compaq agreement is just one of many faults in the argument.

New chip technology gives companies like IBM and Transmeta an advantage in a market where Microsoft’s presence is small – the handheld/portable computing market. Both companies have developed chips that consume a fraction of the power current chips require. In addition, Transmeta’s new Crusoe chips are designed to run both Microsoft and Linux operating systems.

Advancement in computer chip technology might seem far removed from the Microsoft case and market volatility. But is it really? The greatest competitive threat to Microsoft is in the area where it has almost no foothold. Microsoft makes software for personal computers, but the greatest growth in the computing and Internet device industries is among web-ready telephones and other palm and pocket-sized gizmos, where its Windows CE operating system is in a fight for its life with Palm OS.

Not all old laws are bad, but it would seem that the application of any law to divide a market according to the dictates of government regulators is dubious at best. How could regulators possibly gather enough information to make a decision about who should invent, produce, sell, and deliver all the products available to consumers?

The technology marketplace changes every day. It moves to its own rhythms and has a tremendous record of inventiveness and wealth creation. And these changes wipe out big players, elevate little known start-ups to meteoric heights, and make new communications products available to consumers.

Consumers would be so lucky if the effect of government interventions were so predictable. When it comes to the technology marketplace; it’s best just to leave it alone.