Podcast Summary

The Daily: "How One Tech Monopoly Paved the Way for Another"

Date: August 14, 2024
Host: Sabrina Tavernisi (The New York Times)
Guest: Steve Lohr (NYT technology reporter)
Main Theme:
The episode explores how the recent antitrust ruling against Google draws on the precedent set by the landmark antitrust case against Microsoft in the 1990s. The discussion focuses on the significance, impact, and legacy of the Microsoft trial, and what it portends for today’s Big Tech regulation.

Episode Overview

Sabrina Tavernisi and tech journalist Steve Lohr unpack the historical echoes between the U.S. Department of Justice’s antitrust case against Google and the pivotal case brought against Microsoft in the late 1990s. Lohr—who covered the Microsoft case—guides listeners through how Microsoft’s dominance and the government’s response shaped the tech landscape, and how those lessons are informing today’s legal battles with Google.

Key Discussion Points & Insights

1. Context: Google’s Antitrust Ruling

• [01:28] Sabrina frames the episode around last week’s ruling against Google, where a judge agreed with the DOJ that Google is a monopoly, particularly in the search market.
• The government alleges Google suppressed competition by paying companies (Apple, Samsung, etc.) to make their search engine the default. Google argues this is "just good business."
  • “The allegation here is that Google used its monopoly power to shut off competition and control distribution of its search engine…” (Steve Lohr, 01:49)

2. Why Microsoft’s Case Is Relevant

• [02:45] Steve highlights how Google’s case repeatedly referenced US v. Microsoft.
• The Microsoft case serves as a "template" for how regulators view and address Big Tech monopolies today.
  • “It’s really clear this is a template that the judge is working from… the last time the government took on a big tech company and won.” (Steve Lohr, 02:53)

3. Recap: The 1990s Microsoft Monopoly

• [03:33] Steve sets the scene: Microsoft controlled over 90% of PCs through Windows OS, dominating both economically and culturally.
• Windows 95 launch was a "cultural event," with massive coverage, celebrity faces, and strong branding.
  • “The debut of Windows 95, as nerdy as it was, was a cultural event.” (Steve Lohr, 04:49)
  • Lighthearted pop culture tie-ins, including SNL jokes and appearances by Friends stars.
• Amidst this, the early internet emerges—Netscape creates the first popular web browser, threatening Microsoft’s dominance.

4. The Browser War: Microsoft vs. Netscape

• Microsoft initially underestimates the web; Bill Gates pivots with his "Internet tidal wave" memo.
• Microsoft releases Internet Explorer, bundles it for free with Windows, and uses contractual muscle to edge out Netscape.
  • “Microsoft then bundles Internet Explorer into its dominant product, Windows. It charges nothing for it... undermining Netscape’s ability to charge for its browser.” (Steve Lohr, 09:26)
• Netscape, despite an 80% market share in 1996, goes to the DOJ with a 220-page white paper, kicking off the antitrust probe.
  • “Netscape executives... take this white paper to the Justice Department, and that is the beginning of a landmark antitrust case.” (Steve Lohr, 10:15–11:16)

5. The Microsoft Antitrust Trial

• [12:21] Janet Reno announces the DOJ is suing Microsoft:
  • “Microsoft's actions have stifled competition in the operating system and browser markets. But most importantly, it has restricted the choices available for consumers in America and around the world.” (Bill Gates, 12:40)
• Huge media event; compared to the O.J. Simpson trial and the Lindbergh trial for coverage.
• Prosecution's case centered on predatory contracts and product bundling.
• The “first real email trial”—DOJ uses internal Microsoft emails that reveal aggressive tactics:
  • “In this email evidence... you had the kind of phrasing like, cut off their air supply, you know, crush them, knife the baby.” (Steve Lohr, 14:16)
• Damaging video deposition of Bill Gates:
  • Gates comes off as evasive and overly legalistic, hurting Microsoft’s credibility.
    • “This came off as dishonest and it undermined the credibility of the Microsoft case…” (Steve Lohr, 15:51)
• Microsoft's defense: bundling was pro-consumer and part of rapid tech innovation; government shouldn’t intervene.
  • "We can bundle anything we want to Windows, including a ham sandwich.” (Steve Lohr quoting Microsoft executive, 17:21)

6. The Outcome & Legacy

• Judge sides with DOJ, finds Microsoft abused its monopoly; initially recommends breaking up the company.

• Appeals and political changes (Bush administration) lead to a settlement—no breakup, but new restrictions on Microsoft’s conduct.

  • “The court rulings still stand… it was a big loss for Microsoft, but it wasn’t this catastrophic breakup…” (Steve Lohr, 19:20)

• Some facilitation of competition for outside software on Windows.

• The case’s effectiveness is still debated:

  • Ruling was “too little, too late” for Netscape, which fades away.
  • But the trial “opened the door”—four months after the start, Google is founded.
    • “A small startup called Google was founded. … The door was open.” (Steve Lohr, 20:17–21:26)

• Key Result:

  • It’s widely believed the case forced Microsoft to be less aggressive, creating space for innovation and new competitors like Google.

7. The Echo: From Microsoft to Google

• Google’s dominance today is likened to Windows during the 1990s.
  • “You can look at Google’s search engine as the equivalent of Microsoft’s Windows operating system.” (Steve Lohr, 21:59)
• Judges now refer to the Microsoft case in crafting remedies, including potential structural changes or contract bans for Google.
• The underlying goal: keep markets open for unforeseen new innovations, as the Microsoft case did for Google.
  • “You want that window of opportunity, that door to be open so that whatever comes, it has a better chance of success.” (Steve Lohr, 23:38)

Notable Quotes & Memorable Moments

• On the Microsoft Culture and Trial:
  • “In this email evidence... you had the kind of phrasing like, cut off their air supply, you know, crush them, knife the baby.” (Steve Lohr, 14:16)
  • “This came off as dishonest and it undermined the credibility of the Microsoft case…” (Steve Lohr, 15:51)
• On Microsoft’s Defense:
  • “We can bundle anything we want to Windows, including a ham sandwich.” (Steve Lohr quoting Microsoft executive, 17:21)
• On Lessons for Today:
  • “You want that window of opportunity, that door to be open so that whatever comes, it has a better chance of success…” (Steve Lohr, 23:38)
• On the Full-Circle Nature:
  • “It just all comes full circle here. Google sprouted from the ground that had been made fertile by the court case against Microsoft.” (Sabrina Tavernisi, 21:42)
• On the Big Picture:
  • “Which is fundamentally what these cases are about.” (Sabrina Tavernisi, 24:05)
  • “Exactly.” (Steve Lohr, 24:08)

Timestamps for Major Segments

• [01:28] – Recent Google antitrust ruling and how it echoes the Microsoft case
• [03:33] – Microsoft’s dominance in the 90s and cultural influence of Windows 95
• [07:38] – Emergence of Netscape and the browser war
• [09:26] – Microsoft’s bundling tactics and Netscape’s DOJ complaint
• [12:21] – DOJ brings antitrust case against Microsoft
• [14:16] – Internal Microsoft emails reveal company mindset
• [15:03–15:51] – Bill Gates’ damaging deposition
• [16:26] – Microsoft’s "pro-consumer" defense and pushback
• [18:04] – Judge’s ruling: Microsoft abused monopoly power
• [19:20] – Settlement and aftermath
• [20:25] – Legacy: Did the case make a difference? The rise of Google
• [22:05] – Microsoft case as a model for regulating Google and future innovations
• [24:05] – Closing reflection on the purpose of antitrust cases

Conclusion

The episode draws a clear narrative line from Microsoft’s unchecked power in the 1990s, through the famous antitrust showdown, to Google’s dominance today. The Microsoft case not only enabled competitors like Google to flourish, but also set the legal and political playbook for today’s fight to keep the door open for future innovation. The story is a reminder that antitrust regulation, even imperfect, aims to create opportunities for the next wave of unexpected breakthroughs.