SYNOPSIS: Microsoft's monopoly is less threatening than most assume.

I don't know anyone outside Seattle who is really pro-Microsoft. But a lot of us are, at least mildly, anti-anti-Microsoft. That is, we worry that the crusade against Bill Gates sets a bad, even dangerous precedent.

Let's admit the obvious: Microsoft has what amounts to a monopoly position in the operating system market. You can argue that potential competitors have always limited Microsoft's pricing power, and anyway as we move from the wired to the wireless age that monopoly is a rapidly wasting asset. But the dominance of Microsoft's position is hard to dispute (and the company's efforts to claim otherwise, by their very implausibility, did a lot of damage to its case).

Monopoly per se, however, is no sin in the tech sector. On the contrary, the prospect or at least the hope of future market dominance is what drives the whole enterprise. Consider Amazon.com: it has been able to build a business only because people believe that it will eventually have at least some monopoly power. If the invisible hand works too well, and competition from other Internet booksellers keeps Amazon's margins near zero forever, the stockholders who have financed its growth will be sorely disappointed.

The point is that we're not in Kansas anymore -- that is, technology markets cannot function like the market for wheat, in which many competing suppliers drive prices down to the cost of producing one more bushel. High-tech competition naturally and necessarily looks like a series of winner-take-all tournaments, in which "all" means a temporary monopoly that lasts until something dramatically better comes along.

True, Microsoft was not content with winning one tournament; it clearly used its operating-system dominance to get a head start in other competitions. Microsoft didn't sabotage competing software -- I happen to be a Netscape surfer and a WordPerfect writer, and they work just fine in Windows -- but it did make sure that the easiest choice for consumers was to use the stuff bundled with Windows, and most people did just that.

But there is no evidence that any of this has inflicted any harm on consumers so far. Microsoft does not charge high prices or sell poor-quality products, and for most people the standardization of icons, commands and so on has probably been a plus. This means that the real dispute about Microsoft's role is about the putative impact of its strategy on the future -- on innovation, on the range and prices of products that will be available in years to come.

The anti-Microsoft case goes like this: Bill Gates and his henchmen have created an environment in which innovators know that they will not receive their just reward. Invent a better digital mousetrap, and you know that either you sell out to Microsoft -- which puts a ceiling on your potential return -- or you will soon find yourself facing competition from a free Microsoft mousetrap bundled with Windows. So shackling or breaking up Microsoft -- and making it clear that the same will happen to any company that tries the same kind of power play -- will accelerate progress by ending the climate of fear.

The anti-anti-Microsoft case does not deny that there is some truth to that story, but asserts that taking punitive action will be the worse of two evils because it will create a different, and worse, climate of fear -- fear that success itself will be punished. Today Microsoft, tomorrow Intel and eventually (as soon as somebody figures out what it does) Cisco. And oh yes, if Amazon ever does start to justify investor expectations, the Justice Department will step in to make sure that it doesn't. So slamming Microsoft will actually place a chill on future progress.

Both of these positions can be, and have been, defended by reasonable people. I don't know of any objective, quantitative way to decide which position is right; it's a matter of educated guesswork.

But when I see the extent to which judgment -- even, if I may say so, Judge Thomas Penfield Jackson's judgment -- has been influenced not by analysis but by Bill Gates's image problem; when I hear that a coalition of states is demanding damages from Microsoft, as if Windows caused lung cancer; well, my blood runs cold. I know that there is an intellectually respectable case against Microsoft, but I've got a bad feeling about where we are going.

Originally published in The New York Times, 4.9.00