Is Bill Gates Getting Too Powerful?

By Janice Castro

Plenty of technology wizards lie awake nights anxiously wondering what Bill Gates is up to and how to grow up to be just like him. Microsoft (fiscal 1993 revenues: $3.75 billion), the company he heads, already owns the operating systems that run most of the world's personal computers. But good computers are not enough in the age of the information superhighway. As a result, many of Gates' new rivals on this front are monitoring reports of his latest ventures, wondering if Microsoft will invade their territory. Last week, in a stunning series of moves, the tousled, 38-year-old Harvard dropout treated them to a waking nightmare of activity:

--Teaming up with Craig McCaw, whose McCaw cellular-phone firm is the largest in the U.S., Gates unveiled plans for Teledesic, a $9 billion wireless global- communications network, linked by 840 new satellites, that would deliver interactive video and other data services beginning in the year 2001.

--While analysts were debating whether this global network was feasible, Microsoft announced a deal with Japan's Nippon Telegraph & Telephone, the world's second largest telephone company, to design business applications for CD-ROM and facsimile machines.

--Meanwhile, Gates visited Beijing, where Chinese President Jiang Zemin asked him to help China, one of the last great frontiers of the knowledge economy, develop its information industry.

--Gates closed out the week by announcing a $152 million deal with Mobile Telecommunication Technologies (Mtel), by far the largest paging firm in the U.S., to develop a nationwide wireless network for sending and receiving data from personal computers and other devices.

What is Gates up to? The same thing most communication entrepreneurs are doing: looking for ways of shifting into the fast lane on the information highway as it is built -- except that when Gates pulls alongside, others may be forced onto the shoulder. Within 10 years a handful of major firms are likely to dominate the three major areas of the digital world. One group will provide fiber-optic and satellite networks to carry entertainment, telephone service, video teleconferencing and other communications. Another will supply the programming. A third segment will furnish the software that controls the so-called magic box that consumers will use to access all these services.

In anticipation of this era, software companies are teaming up fast. In the past few weeks, Novell, a network-software leader, has announced plans to buy WordPerfect, a top maker of word-processing software; Adobe and Aldus, both publishing software firms, are hooking up, as are Electronic Arts and Broderbund, makers of games and educational software. Such mergers, of course, are typical of the consolidation going on in the $7.3 billion computer- software industry, where companies are attempting to strengthen their competitive positions for the battles ahead. But even in this context, Gates' sweeping ambition stands out. "The leadership of Microsoft is the most aggressive in the industry," says Bill Bluestein of Forrester Research, which studies the computer industry. "They've been able to exploit their position as an operating-system provider and propel the company into all sorts of markets." Microsoft's tactics have often drawn fire from its competitors, who have accused the company of engaging in monopolistic schemes. The Justice Department is investigating Microsoft.

Gates demonstrated the scope of his goals once more last week by taking on Motorola with his Teledesic proposal. Motorola has announced plans for its own satellite-linked worldwide system, through a new firm called Iridium. While Iridium is designed for portable devices such as phones and hand-held computers, Teledesic is intended for fixed locations, such as offices. Both ventures will compete with the U.S. phone companies, which are busily laying cable for a fiber-optic system costing at least $100 billion that will carry video signals and data as well as voice communications. Both systems will also require a large number of satellites.

The launching of Teledesic left some critics wondering whether it is just another example of Gates' flexing Microsoft's muscle to lock out the competition, in this case by moving to control as large a share as possible of the limited supply of satellite slots when the FCC auctions them later this year. Those slots will only grow in value as the information highway is built. Certainly Gates is hedging his bets. Microsoft is working on development of the magic-box system. Its co-venture with Mtel will position it in new delivery technologies. Up until now, most people had assumed that Gates wanted to program the magic box. At this rate, he may own it.

With reporting by David S. Jackson/San Francisco and Suneel Ratan/Washington |