Leading Article: To tame the Microsofts of the future, we must keep up with them

ONE STEP behind - and always one step behind. The ruling against Microsoft in a United States court last week was welcome, but too late. The old ways of doing things have to change, if lawmakers and regulators around the world are to have any hope of keeping the idea of fair competition alive and well.

It was interesting that Tony Blair met Bill Gates last month. The Prime Minister is a politician who recognises, in his rhetoric at least, the need for governments to modernise if they are to keep up with technological change. Everyone knows that Gates is a monopolist; that he has abused his dominant position in the basic software market in order to gain leverage on the Internet, as Judge Thomas Penfield Jackson ruled on Friday.

Some people mind this less than others, because Microsoft has failed to crush all opposition and innovation on the World Wide Web - as it was bound to, since the Web is simply too big, and is growing too fast. Equally, most Microsoft products are rather better than their Apple-eyed detractors allow.

Nevertheless, it cannot be right to let Gates get away with overcharging his customers and bullying his competitors. The trouble is that the trial in the United States lasted for nearly a year. And a year in what Mr Blair called the "e-conomy" (a joke that works better on paper than it did when he delivered it to the CBI conference) is a very, very long time. Since the case began, Netscape, the principal victim of Microsoft's anti-competitive behaviour, has merged in a $4bn deal with America On Line (AOL) and moved on.

Mr Blair recognised the speed of change last week, commenting wryly that when in 1995 he first announced his planned deal with BT to cable up all schools and libraries, the thing he was hoping to connect them to was called the "information superhighway", a term now buried four years deep in an archaeological dig through the history of the Internet.

But his actions, as so often, lag behind his words. The Government's "e-envoy" - to co-ordinate policy on electronic commerce - will not take up his post until January. Britain is not going to catch up with America and Scandinavia in e-commerce by waiting until next year to start.

Similarly, it took until a few months ago for the Government finally to give up the idea of trying to devise a law to stop ordinary people, businesses and criminals "encrypting" e-mail so that they can send confidential messages to each other. It was a doomed plan that would only have held up the development of the Net as a means of business communication.

At least Mr Blair knows - as does Al Gore, President Clinton's vice-president and one of his possible successors - that governments and regulators are bound to trail in the wake of technological change. Knowing that, we realise that the ethos of regulation has to change.

The Microsoft case proves that the US, and the rest of the world, needs a phase of regulatory innovation to catch up with technological innovation. Just as the original US "antitrust" legislation was devised to tackle the tendency to monopoly by Rockefeller and others, who exploited the opportunities of mass capitalism, so a new regime needs to be created to deal with the new kind of capitalism.

The hallmark of the new regime must be speed. Just as economic change gets faster, so must the trust-busters. We need swashbuckling consumer champions, empowered by law to take forceful and pre-emptive action. Judge Penfield Jackson showed the right spirit; being overtly biased against Microsoft, he e-mailed his judgment in Word Perfect (which is one of the few word-processing programmes to have survived Gates's scorched-earth tactics). But he could not act quickly or forcefully enough. What was needed was someone who could have ordered Microsoft to license Windows. What we need in Britain is someone who could order phone companies to offer free local calls.

Governments will never quite be able to catch up with profit-making innovators. But instead of devoting limited resources to the bolting of the doors of empty stables, we need a new breed of regulators who could at least try to head the horses off in the right direction. We need them to disrupt the tendency to monopoly, and to ensure open competition in the public interest.