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,
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
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."