Split Microsoft's Operating Systems Business from its Desktop Applications Business

In the case of AT&T in the late 1970s, the federal courts decided that allowing one company to deal in both long-distance telephone service and in the natural monopoly of local telephone service provided too great an opportunity for anti-competitive practices. The courts split AT&T up into a long distance carrier and seven regional local telephone service companies. A similar course of action is possible in the Microsoft case: Microsoft could be split into two separate businesses, one of which created operating systems and the other of which created applications programs.

This option has the advantage of eliminating Microsoft's opportunity and incentive to use anti-competitive practices to use its monopoly in operating systems to gain market share in application markets. Microsoft formerly claimed to have an organizational "Chinese wall" in place that prevented Microsoft applications developers from getting early access to changes being made the Windows operating system, but now everyone, including Microsoft, admits that no such firewall exists. Splitting Microsoft into two separate companies would effectively create such a firewall.

This option would have the disadvantage of doing away with the operational efficiency benefits that Microsoft is able to glean from being vertically integrated, benefits which are passed on to the consumer in the forms of low prices and tighly integrated software products that work together well. Another disadvantage of splitting Microsoft is arguably that it would be unfairly punishing a successful company whose main "fault" has been that it makes better software and markets it more shrewdly than its competitors. This remedy might appear excessive given the nature of the offense.