MIT experts clash in Microsoft case

Franklin Fisher, the MIT economics professor who testified yesterday in the Microsoft Corp. antitrust case, spent much of his time on the witness stand refuting the work of a fellow MIT colleague and Microsoft expert witness, Richard Schmalensee.

Before court recessed for the day, Fisher appeared to have hit every element of Schmalensee's earlier testimony -- his economic analysis, judgment and data -- characterizing them in parts as "muddled," mixed up," "confused" and even "ridiculous."

David Boies, the lead government attorney, said after Tuesday's court session that Fisher's attack on Richard Schmalensee, dean of MIT's Sloan School of Management, was "gentle."

However, it was hard to imagine how Fisher could have built a more sweeping attack.

In the late afternoon session, Fisher attacked the statistical data that Schmalensee used to build his thesis.

Schmalensee's browser market-share analysis was built on survey data that didn't measure what people actually do but what they say they can do, Fisher said. And the answers people give to these kinds of surveys can be "quite confused," he said.

Peculliar survey results

One survey result, which Fisher termed "very peculiar," asked people who used Windows 98 where they got their browsers. Less than 20% of the sample answered that they got their browser with the computer, despite the fact that Internet Explorer comes with Windows 98.

Fisher also questioned whether Schmalensee was gullible in his dealings with Microsoft. In his testimony, Schmalensee has said a certain economic calculation was impossible because of Microsoft's practice of recording sales on paper. Fisher said that Schmalensee "with his usual good nature, was rather credulous."

Fisher will return to the witness stand today for more questions from Boies. Microsoft's cross-examination is expected to begin this morning as well.

Schmalensee will get his chance to defend himself as a rebuttal witness for Microsoft.

On the issue of America Online Inc.'s purchase of Netscape Communications Corp., Fisher argued late yesterday that it was unlikely that AOL wouldn't adopt Netscape's browser. AOL now uses Internet Explorer technology for its interface.

Microsoft believes the Netscape browser could become an operating system threat if independent software developers began developing applications to run off it. But Fisher believes that Netscape's market share has been damaged beyond repair. "I think it's too late," he said.

Fisher, questioned by Boies, said that many of the problems in Schmalensee's analysis stem from his decision not to define operating systems as a separate market. Instead, operating systems in Schmalensee's analysis were included as part of the software market generally. "That's not relevant," Fisher said.

No alternative to Windows

Microsoft customers don't believe that they have any serious commercial alternatives to the Windows operating system, he argued. Moreover, Microsoft has the ability to raise prices without fearing that its customers will go elsewhere.

Schmalensee had argued that Microsoft's operating systems faced numerous threats from existing competitors and from unknown developments -- all of which constrained the company's behavior and pricing.

But Fisher said that notion that a "wolf might come out of the forest" to challenge Microsoft isn't a serious threat.

"I don't believe that is going to happen and according to a recent Newsweek article, neither does Mr. Gates," said Fisher, referring a recent column pennned by Microsoft CEO and Chairman Bill Gates entitled "Why the PC will not die."

Fisher said the possibility of future threats "doesn't prevent Microsoft from having monopoly power today."

This story, "MIT experts clash in Microsoft case" was originally published by Computerworld.

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