(FORTUNE Magazine) – Less than 24 hours after Hewlett-Packard announced that it plans to merge with Compaq, the government announced that it was taking a new approach to the Microsoft antitrust action. There is a direct relationship between the two announcements.

The root cause of the HP-Compaq deal is the way Microsoft plays its existing monopoly. It wields that monopoly so effectively that computer makers have no way to compete effectively with one another. That's resulted in a moribund industry where every company--with the exception of Dell--is scrambling to stay alive.

If the government's job is to encourage competition, then the Justice Department did exactly the right thing in abandoning the old plan and announcing that its lawyers would now focus their efforts on the relationship between Microsoft and its hardware customers. The idea of breaking Microsoft into two companies was silly at best and misguided at worst. So let's applaud whoever at the current Department of Justice was smart enough to abandon the efforts of the previous Administration.

Here's the bottom line: The computer you use was not designed by the company you bought it from. You've got to pity the CEO of a PC hardware company. He (or she) manages billions of dollars of revenue without the ability to make a product unique. The result: The only way to compete is on price. Only Dell has learned how to manage the price of its products to its permanent advantage. We can all agree that it would be useful to competition for there to be more than one computer company.

I got a new notebook PC recently, a Toshiba Portege 3490CT. I have my reasons for liking it, most of which have to do with its weight and port configuration. But I can tell you definitively that nothing about the computer's software is different from that of any other computer I might consider buying. And that really annoys me.

Think about how boring life must be for a computer engineer these days at Toshiba (or any other computer company). What does that engineer get to decide? What battery to use? Which screen technology? Which disk drives, modems, memory, and so on? Sounds like a lot, but every notebook uses pretty much the same devices, since this is a commodity business where suppliers live and die by delivering on time and at low cost. Well, at least an engineer decides what microprocessor to use, right? Uh, ever heard of Intel? Some PC makers actually dare to use chips made by AMD, but that just makes this a two-horse race--or to be more precise, a one and a quarter horse race.

All that leaves is software, which is when you realize that there is no real reason for Toshiba to maintain an engineering staff.

In software, as opposed to hardware, PC manufacturers should be able to differentiate products. In an ideal world, their operating systems would have different features; they would bundle in different applications; they would offer different interfaces or graphics. These are things consumers would respond to, that would affect the way we relate to our computers. But with the exception of the Apple Macintosh, every PC has the same software, look, and feel, and most also offer pretty much the same applications.

This dearth of unique software is a direct result of the relationship between Microsoft and the hardware makers. That relationship's been a one-way affair for years, but the most amazing example of how warped it is occurred this summer. Microsoft first decided that a truly clean user interface required that a computer running Windows XP have no icons on its desktop screen. That's a remarkably weird decision; what desktop has nothing on it? But Microsoft was so convinced by its rationale that it told the PC makers that they too were not allowed to place any icons on the desktop of a PC running XP.

The computer manufacturers actually complained about this. So Microsoft came back with a different offer: Sure, put icons on the desktop...but for every one that you put there, a certain number of Microsoft's own icons will also be placed there. So on the one hand Microsoft is saying the desktop should be wide open and free, and on the other Microsoft is unwilling to relinquish the authority to determine how the computer's screen looks.

I don't think I've ever seen such a clear instance of total arrogance. It's as if CBS, for example, were to insist that Sony display the CBS "eye" onscreen as soon as you turn on a TV set. But of course CBS doesn't have that kind of pull. Microsoft does.

So now the government plans to focus on this. Bravo, I say, and good luck! The future of my personal computing experience rests in the hands of the Bush Administration.

STEWART ALSOP is a partner with New Enterprise Associates, a venture capital firm. Except as noted, neither he nor his partnership has a financial interest in the companies mentioned. He can be reached at alsop_infotech@fortunemail.com. His column can be bookmarked online at www.fortune.com/technology/alsop.