Good morning. I am very pleased that the Committee is continuing its inquiry into Competition, Innovation and the Digital Age. Whereas our hearing last March, which I thought was an extremely useful hearing for the Committee, focused primarily on the so-called browser wars, today we will turn our attention beyond the browser to examine a set of other, more current and arguably more important issues regarding competition and innovation in the software industry.

As I have said before, it is my firm belief that preserving competition and innovation in the software industry is one of the more important economic policy issues of our time. Without belaboring the point, let me just repeat what is now becoming clear: With every day we are coming to live and to work in an increasingly networked, technology-driven world. In the next century, it is likely that we will depend to a great extent on the Internet, intranets, and other Internet-related technologies to communicate with one another, to conduct our businesses, to obtain news and entertainment, to teach our children, and to purchase goods and services. All this will be made possible by the software which allows us to interconnect with, and share information over, this ever expanding network.

People have and will differ over the so-called Microsoft issue. But what I think is imperative is that the media, the public, and official Washington, begin to understand that this issue is about much more than the question whether a browser should be part of an operating system. There is little question that Microsoft now controls the PC software market, with Microsoft Windows enjoying monopoly market shares over 90%. The critical debate, many believe, is the extent to which Microsoft is exploiting its current monopolies both to kill off potential threats, and to leverage these monopolies to control new technologies which will define the future of computing, of the Internet, and of how we conduct much of our daily lives and businesses. I believe that time will prove this to be a vitally important question for our government and our society.

I would like to quote an excerpt from a New York Times article from this past Sunday, and have the entire article inserted into the record. The article reads as follows:
Why has Microsoft spent so much money and muscle on a mission of giving away software?

The answer is that Microsoft is a forward-looking company with a sharp eye for the power points, the lever arms, the control valves in the emerging digital economy. In the software sector of the late ‘80's and early 90's, there was just one important power point, the operating system. Microsoft owned it and used it to gain dominance.

In the helter-skelter Internet-driven world we’re now entering, a variety of power points are taking form. The start-up screen, what you see when you turn on the computer, is a power point; Microsoft insists that manufacturers hand over all rights to that screen. We’re not just plumbing. Internet search sites are power points, because they can become habitual portals of entry for users seeking information or ways to spend their money. That’s why it was important to make sure that your Search button would take you to a page at home-dot-Microsoft-dot-com.

Before long, a power point will be the ownership of the standards for streaming audio and video data at high speeds across the Internet. A hodgepodge of companies have been working to create these standards -- but Microsoft, proudly defending its right to “innovate,” has had its checkbook out and now owns all or part of each of these companies.

In fact, one of those very companies is with us today, and I think we will have a rare opportunity from this witness, and the other industry players who have come to testify today, to learn some more about what is happening in the software industry, which today is the crucible from which our digital economy will take shape.
Before proceeding to our witnesses, let me make a few procedural comments.

First, I’d like to thank my colleagues on the Committee for their cooperation and forbearance with respect to the planning of this hearing. While the hearing itself has been planned for some time, we have not been able to inform Committee Members until relatively late in the day regarding our final witness list. This has, I know, made it more difficult and onerous for Members and their staffs to prepare. Let me just say that this situation was an unavoidable consequence of the fact that these are some very sensitive delicate issues for some of our witnesses, who had serious concerns about testifying publicly. But I would like to thank my colleagues for their bipartisan willingness to work with me and my staff within these constraints, in such a cooperative and supportive fashion.

I would also like to thank all of our witnesses for coming here this morning to testify on these issues. Regrettably, Microsoft has not accepted our invitation to appear today. I am disappointed that Microsoft is not here to help educate us on these important matters. Quite frankly, I think Members of this Committee would benefit from hearing Microsoft’s perspectives on the issues that I expect to come up today. And, regrettably, Microsoft also declined our invitation to propose other witnesses who might round out our panels. The fact is that our doors have not exactly been knocked down with companies asking to defend Microsoft’s business practices. So, while some might suggest our panels are lacking “balance,” there frankly is little we could do to remedy this.

Nevertheless, I believe it is in the interests of Microsoft, the Senate and the public that Microsoft be given an opportunity to appear before this Committee to respond to any testimony it deems incomplete or inaccurate. Accordingly, yesterday I sent Microsoft a letter offering Microsoft the opportunity to reconsider its decision not to appear today. Obviously, Microsoft has not taken me up on this offer. But, as I told Microsoft in that letter, “I stand ready to work with you over the coming weeks to provide Microsoft with an opportunity and a forum at which its representatives, and others, can respond to the testimony we receive.”

In any event, I do believe we have a superb lineup of industry leaders who are more interested in sharing specific information to assist the Committee than in taking unfair shots at Microsoft, and I look forward to hearing their testimony.