He is worth billions of dollars, he rules cyberspace, now Bill Gates is going into battle with the US government

HISTORY may be made in Washington this week, and we are not talking about the Middle East peace process or the latest twist in President Clinton's sexgate sagas. Featuring the US Justice Department and a single corporation far away on the West Coast, this is much dryer fare, with baffling buzzwords like "bundling" and "browsers". Know that that company is Microsoft, however, and you begin to guess at its importance.

Even the barely computer-literate among us understand the power of Microsoft and its mega-billionaire CEO, William Gates III. Its Windows operating systems are to be found in no less than 90 per cent of all personal computers bought today. The Seattle-based behemoth has become the prime symbol of energy and innovation in a humming US economy. Because of its success, however, it is also feared.

It is that fear that may now threaten much of what Microsoft has achieved. Anti-trust (or monopoly) regulators in the Justice Department, as well as politicians in several US states, are asking themselves a highly portentous question: is Mr Gates now presiding over a monopoly so powerful that free competition in the computer sector is being stifled? Is Microsoft, with its easy-to-use Windows technology, good news for consumers, or is it actually bad news? If the latter is the case, what is to be done?

Unfolding before us is a government-vs-private-enterprise battle of gigantic proportions that dates back to the introduction three years ago of Windows 95. In a first lunge at Microsoft, the Justice Department persuaded Mr Gates to to desist from bundling into Windows a new feature called Internet Explorer. Known as a "browser", it offered users a free direct connection to the pages of the World Wide Web. It was Mr Gates' first attempt to seize primacy in the newly-emerging Internet market and flatten others who had grasped its importance before him, notably Netscape Communications.

Since then, the Justice Department has accused Gates of reneging on that deal and has filed with the federal courts for an injunction against Microsoft selling any more Windows programmes with an integrated Explorer function. A ruling from the courts is now pending and last week Microsoft filed a pre-emptive appeal.

In recent days, however, the war has become considerably hotter, and for one principle reason: on Friday, Microsoft plans to begin shipping to PC manufacturers its sequel to Windows 95. It is Windows 98 and, needless to say, among the options that will appear on its start-up screen is Internet Explorer. Windows 98 is scheduled to be available on computer-shop shelves towards the end of June.

What has been evident for some time is that the Justice Department and the single-minded Tsar of the Microsoft dossier, Joel Klein, is weighing a much broader anti-trust action against Microsoft than the one already in train. It is also clear that if the action is indeed to be launched, it probably will have to happen before Friday. There is one immediate possible consequence: a new and instant order that Explorer be stripped from Windows 98 before it is shipped. That could delay its launch by several months.

And it is not just Mr Klein that Microsoft has to worry about. Eager to win their own starring roles in what may be the biggest anti-trust action since the break-up in 1911 of Standard Oil - the Rockefeller-owned giant that held a 90 per cent share in its US market - the attorneys general of as many as 20 individual US states are also considering lawsuits against the company for monopoly behaviour.

Just how far Mr Klein might want to go in humbling Microsoft is still a matter entirely of conjecture. While seeking its break-up a la Standard is an option, most observers still consider it unlikely. Forcing Gates to un-bundle Explorer would surely be a first line of attack, however. He might even seek to oblige Microsoft to make amends for past sins, for instance by actually featuring Netscape's rival browser function on the Windows platform. As a justification, Mr Klein could point out that once Microsoft began essentially giving away its browser for free as part of Windows, Netscape's share of the Internet-connection market plunged from a high of 75 per cent to about 55 per cent today.

Speculation is also rife that Mr Gates will be accused simultaneously of abusing an agreement he struck with rival Sun Microsystems to use its pioneering Java computer language on the Windows platform. Sun has alleged that Java was conceived as a language that could be used on all types of computers, and that Microsoft, by slightly altering its version of Java, has basically sabotaged that essential feature.

Events could, however, take a much less dramatic turn. Conceivably, Klein and Gates might yet strike an amicable settlement. It is even possible that the Justice Department and some of the attorneys general could retreat from battle, particularly if they conclude that they are on the wrong side of the philosophical argument about government intrusion in private enterprise.

Microsoft, needless to say, has been running a high-octane spin campaign in defence of its practices for very many months. Politicians, journalists and Klein himself have been furiously lobbied. At a rally in New York last week, Gates surrounded himself with CEOs from other computer companies all exclaiming that any delay in the release of Windows 98 could be ruinous for them and even for the US economy at large. And in the realm of public opinion, Mr Gates may be winning. A poll commissioned by Microsoft last week suggested that most ordinary Americans think Microsoft should be left alone.

The enemies of Microsoft like to indulge in almost Biblical metaphors about the doom that a Microsoft monopoly will visit upon us. "If it's Microsoft versus mankind," remarked Larry Ellison, the chief of Oracle, "I'm on the team of mankind." But others with faith in the free market's power of self-correction have a quite different take. If Windows is on 90 per cent of computers there is a reason: people like it.

It is a conundrum, and this week it belongs to Mr Klein.