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Justice Dept. Is Urged to Buy From Rivals of Microsoft

Computers: Consumer advocates say government procurement rules unduly favor the software giant.


WASHINGTON — Stymied in their bid to persuade the Justice Department to take stronger antitrust action against Microsoft Corp., consumer groups are pressing the federal government to buy more software from Microsoft's rivals.

Consumer advocate Ralph Nader raised the issue of how the federal government decides which software it purchases with the $1 billion it spends annually when he met with Douglas Melamed, principal deputy assistant attorney general at the Justice Department. Nader and Jamie Love, director of the Consumer Project on Technology, argued that it is as unwise for the government to rely on a single software supplier as it would be to depend on a single defense contractor.

"The current procurement standards push the government toward Microsoft products," said Love, whose Washington-based watchdog group focuses on computer policy matters.

Under a year-old procurement reform measure, federal agencies have the flexibility to purchase computer products without any longer having to go through the red tape over product specifications and price. But privately, many software developers say the measure has strengthened Microsoft's hold on the market, since many federal employees want to use the same Microsoft software products they use at home.

Microsoft's MS-DOS and Windows software operates 80% of the world's personal computers, and Microsoft Office software, a collection of word processing, spreadsheet and other programs, is now the leading bundle of business applications, selling about 1 million copies a month.

Justice officials did not indicate whether they would support Nader's suggestion, which the consumer advocate will present this month to the General Services Administration, the federal government's procurement arm. Nader could not be reached, and Melamed declined comment through a spokeswoman.

Vivek Varma, a spokesman for Redmond, Wash.-based Microsoft, said the company had not heard of Nader's proposal but argued that Microsoft's success in the market stemmed from its superior product offerings.

"Government agencies need to get the best value they can for their technology [investment], and Microsoft offers great technology at attractive prices," Varma said.

Consumer groups from California and four other states are scheduled to visit Capitol Hill on Monday to lobby legislators to hold hearings on Microsoft's business practices in the wake of the software giant's recent multimillion-dollar investment in rival Apple Computer Co.

For more than a year, the Justice Department's antitrust division has been examining several Microsoft purchases and investments in other software and hardware companies. The Justice Department has taken no action against Microsoft and has not indicated what, if any, business behavior it is focusing on.

But the agency is believed to be interested in Microsoft's Internet activities, including the marketing of Microsoft's forthcoming Internet browser and several investments in technologies that allow computers to receive audio and video over the Internet.

In July, Microsoft acquired 10% of Progressive Networks and licensed Progressive Networks' RealAudio and RealVideo real-time streaming computer data transmission formats. Microsoft also acquired another Silicon Valley audio-video start-up, VXtreme Inc. Those deals come on top of Microsoft's $425-million purchase of Web TV.

Experts believe Microsoft hopes to use these investments to establish an industry standard for deploying multimedia technology over the Internet.

In addition, Microsoft is gearing up to give away copies of the latest version of its Internet browser--a tactic archrival Netscape Communications Corp. used to become the dominant Web browser. But critics say that the giveaway, scheduled to begin Sept. 30, is evidence that Microsoft is using predatory pricing and its software dominance to gain control of everything from the Internet to television.

The ploys have begun to unnerve some rival software makers who had not spoken out publicly against Microsoft for fear of reprisals.

Executives of Powerquest Corp. in Orem, Utah, for instance, say sales of their new Drive Image software have been hurt because Microsoft has vowed to withhold technical support from customers who install Drive Image or other products that use similar technology to copy files on a hard drive in order to quickly restore them in the event of a computer crash.

Microsoft said the policy helps avert possible unauthorized duplication of its software products. But Robert Raymond, Powerquest's vice president of development, said he believes Microsoft won't help users of imaging software because Microsoft plans to offer its own solution in the next version of Windows.

"Even though our product offers users great benefits, our prognostication is that the [Microsoft] threat . . . will have a fairly severe impact" on the willingness of consumers to use Powerquest's product, Raymond said.

Some federal officials say the government has similarly become reluctant to seek software alternatives to Microsoft.

Ronald S. Stone, chief information officer for the Federal Communications Commission, for example, said all of the agency's 2,600 desktop computers run on Microsoft's Windows operating system software.

He said the FCC recently jettisoned competing word processor and spreadsheet products in favor of Microsoft applications.

"Today, there's really no option in our view," Stone said. "Are we concerned about it? Yes . . . but from our perspective, as long as the products work well and the costs are reasonable, it's the most" prudent thing to do.

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