Testimony from June 16, 1999

Prepared Testimony from Scott McNealy, Sun Microsystems

Mr. Chairman, and distinguished Members of the Committee, I appreciate the opportunity to
testify before you today to discuss the critical role the high- technology industry plays in the US economy,
and to share my views on what the world of computing will look like in the future. On the eve of the 21st
century, high technology has created a powerful new Net economy that is vital to America's growth.
According to the Department of Commerce's report, "The Emerging Digital Economy", the information
technology industry has been responsible for nearly 35 percent of the real economic growth in America
over the past three years. Much of this growth has been driven by the convergence of the
telecommunications, software, content and computer industries. As the technologies used to create, store
and convey information converge, the potential benefits for users increase dramatically. But so does the
potential for the concentration of power in a few hands a counterproductive outcome that would deny the
public at large the full benefits of the digital revolution. Before discussing these issues further, I will briefly
discuss the history of Sun Microsystems, Inc., because it demonstrates a long term commitment to open
systems and the freedom of innovation. Sun's history and vision Sun Microsystems, Inc. is an
American success story. Founded seventeen years ago, Sun has been challenging the "mainstream"
computer industry and creating new technologies ever since. The company was started by people who
envisioned a powerful desktop computer that would meet the needs of the technical community, but at a
fraction of the cost of much larger machines. Sun's founders believed that the computers we produced
should be based on open interfaces. This approach, unique at the time, allowed customers to mix and
match Sun systems with products made by other vendors, and freed them from a proprietary lock-in to
one company. We believed then, as we do today, that open interfaces support competition and encourage
innovation by enabling anyone to develop new and different implementations. This leaves the consumer
free to decide which products are best. Today Sun offers a wide array of products, technologies and
services that enable enterprises to compete in a new net economy defined by the Internet and network-
centric computing. Our vision is to provide access to information by anyone, from anywhere, at anytime,
on any device. Sun's Java(TM) technology is an example of our commitment to open network computing.
Java enables the WebTone, the 21st century equivalent of the telephone dial tone. Like the dial tone, the
WebTone is always there, making the network and its array of information and services always available
to the user.  Convergence: The Service-Driven Network of the Future As the technologies we use to
create, store and distribute information converge, information and services will travel across multiple
networks (like the Internet) to the user, who will be able to receive it on a variety of devices. In this new
digital world, the Internet becomes a service-driven network, where service providers offer a wide variety
of content and services to network users. Five years from now, for example, company managers won't
buy much software. They'll outsource their software needs to service providers, and save money in the
process. E-mail is another example. E-mail is e-mail. Most e-mail applications are standard, and they
won't provide companies with a competitive advantage. Thanks to the Internet, they can outsource it to a
service provider, who can handle it more cost-effectively. And it will free company managers to focus on
what will matter in the future: making their companies more agile and more able to compete in the new
Net economy. This explains why almost overnight, the Internet has changed the way we shop, travel,
share information, enjoy entertainment -- in short, the way we live our lives. However, we must take
precautions to ensure the healthy development of the new digital society. We need strong, exportable
encryption to protect information in the global marketplace. Export control policies for computers must
keep pace with rapid technological advances. Failure to update controls this year will force both the U.S.
government and industry to devote considerable resources to policing the export of tens of thousands of
systems that are available from foreign competitors. The result -- U.S. computer companies will lose sales
with no gain in security. This will eventually limit the ability of these companies to shape the future of the
Internet era. This will also limit the ability of these companies to supply our armed forces with the cutting
edge technologies they need to maintain the advantage on the battlefield. Only by being allowed to run
faster and remain competitive, can U.S. computer firms play their role in helping to protect our nation.
We must also have free and open competition among the companies that will provide access to the
Internet and all it has to offer. It is inevitable that some companies may attempt to control all the levers in
this new paradigm, but no single company should be permitted to do it all. Any model premised on one
giant company trying to capture all the business is ultimately harmful to consumers. Finally, we must
make sure that we preserve the openness of the Internet by safeguarding the open interfaces that permit
one system or program to work seamlessly with another. It is only through these open systems that we
can enable a service- driven network that is available to everyone.  Java Technology and WebTone
WebTone is a prime example of a new digital technology that can foster innovation and competition in the
face of this inevitable convergence. The Internet caused the focus of computing technology to shift to a
fundamentally new, point-and- click way to access information and services. This paradigm shift launched
the computer industry into a period of unprecedented growth -- and brought the world's companies into a
new "dot-com" economy. As the company that powers the Net, Sun's products and services are key to
doing business in the network age. By using open interfaces, Internet standards and platform-independent
Java technologies, Sun enables companies of all sizes to deliver a broad range of services across
traditional industrial, geographic, political, and linguistic boundaries. At the heart of it all is Java
technology, which grew out of Sun's commitment to open network computing. Java combines the
WebTone -- namely highly reliable, always available network computing -- with a universal, "Write Once,
Run Anywhere"(TM) software platform. Because Java is truly platform-independent, developers can
create applications on a single platform and deploy them to multiple different platforms from one central
location. This lowers system administration expenses and results in a greatly reduced overall cost of
ownership. Java brings the power of network computing to the general public because it enables the
networked consumer. Java extends the Net and its services to a wide array of non-PC devices like smart
cards, phones, digital set-top boxes, pagers and other appliances, ushering in a whole new world of
interaction. WebTone, with its constant availability, ties it all together. Like the dial tone, it is simple to
use, always available, and accessible from any device. It is essential to providing users with services such
as e-commerce, e- mail, and other services that are at the heart of the service-driven network. But it takes
open technologies to make it happen. Jini, for example, is a Sun technology that enables different
computers and other digital devices to plug together to quickly form impromptu, networked communities.
In essence, Jini provides interfaces that enable networked devices to be represented as services accessible
by other devices connected to the network. Think of it as " plug-and-play '' for network-aware devices.
It's all part of the Net -- highly reliable and always available networks designed to keep us and our
organizations and businesses connected, informed, and productive as we move forward into the next
century. To accomplish all this, we need to continue to promote and enforce open standards for Java
technology. Java-based technologies are removing the barriers to competition and enabling a variety of
industries to reach markets that were unimaginable just a short while ago. Java technology is spawning a
multibillion-dollar "dot-com" industry which will innovate and compete to provide services and content
across the service-driven Internet to millions and ultimately billions of customers worldwide. A principal
concern, however, is perhaps best expressed in an article that appeared in the December 1997 issue of
Red Herring Magazine. "Java potentially strikes at the heart of Microsoft business by offering an
alternative platform to Windows, and Microsoft has seen fit to retaliate in every way possible by creating
Windows-only extensions to Java and by threatening not to ship the updated version of Java." This type
of anti-competitive behavior corrupts the ability of Java to function fully as a cross- platform technology,
and will leave consumers locked in to the old proprietary standards of the PC era of computing. As we
enter this new, post-PC era of "invisible computing," where the Net extends from home to work to school
to wherever we are, it is essential that we continue to support the open standards that will foster
innovation and competition, and that will enable our industry and our nation to thrive.  Policy
Recommendations To fully realize this seamlessly networked, digital future, however, we must ensure
that markets work properly and that competition based on innovation is vibrant. This is where we in the
industry must count on you in government to safeguard the road we must travel to reach that future.
Congress, and in particular the Judiciary Committee, given its unique authority, must continue to monitor
the state of competition in the high technology industries. While it would be inappropriate for the antitrust
enforcement agencies to micromanage the economy, they should nevertheless act decisively to enforce
the law when the need arises. Then, when a decision to bring enforcement action is made, it is crucial to
act vigorously and quickly. I thus support the Justice Department's case against Microsoft because it will
help to protect the new technologies that will shape the post PC era I have just discussed. Let me be
clear. Microsoft operates beyond the constraints of market discipline, and thus harms every competitor
who seeks to bring products to market. This environment also harms consumers. How? In the current
environment, where certain innovative and competitive products are blocked from the market, consumers
lose their right to choose. It is as simple as that. The United States' anti-trust laws have provided for the
most successful, vibrant economy in the world for over 100 years. They still serve us very well, and will
continue to serve us well as the technology industry takes its place at the forefront of the US economy. In
this context, putting Microsoft under market discipline is not a question of regulation. It is a question of
law enforcement. The appropriate and effective laws already exist. What is required is to have those laws
enforced. At Sun, we want to compete. Fairly. Where success is won on the merits of our products and
services rather than through the exertion of a chokehold on the market. It is clear that Microsoft is a
monopoly. I believe the Justice Department has very clearly shown that Microsoft has abused that
monopoly power. As a result, law enforcement is called for. The government now must be creative,
persistent and judicious in using its power to define remedies that will successfully restore competition to
the industry. There are several conduct remedies being discussed, and Sun supports a number of them.
For example, I agree that Microsoft must be forbidden from entering into exclusive or preclusive
agreements. I support the proposal that Microsoft must be required to make their pricing policies public,
so the price of Windows operating systems -- a must-have product for so many hardware companies -
cannot be used as leverage to control those hardware companies. I also believe that Microsoft's cash
hoard is a competition killer. The government must find creative ways to prohibit Microsoft from buying
into new markets or improperly securing customers with their cash. The danger is very real that Microsoft
will use the power and cash they have garnered from their current monopoly to create a new monopoly --
or several new monopolies -- in the post PC world. In fact, they have already started off down that path.
This must be checked. They must not be allowed to destroy competition in any new markets. Lastly, the
government needs to level the playing field in the software industry so that any company can build
products that will successfully interoperate with Microsoft's operating systems and products. This solution
would require Microsoft to publish their programming interfaces openly and freely. An independent
oversight body would ensure that Microsoft neither uses secret interfaces in their products nor holds back
interfaces from the rest of the technology community in an effort to improperly squelch competition. I
believe that a creative combination of remedies such as these will level the playing field for the technology
industry as a whole, and put Microsoft under appropriate market discipline. Then we can do what we do
best -- compete. I urge each of you to lend your support to the Justice Department and to the promise of
this vibrant new technology economy. Thank you for your time.