Under anti-trust law, it is illegal for a company to use their monopoly power in one business as a competitive edge in another separate market. Therefore, the entire argument turns on two things: (1) was Windows a monopoly (2) was IE an integral part of Windows (hence not a product competing in another market).
Since Windows, for all intents and purposes, was a monopoly, a huge part of the discussion was about whether IE was an integral part of the operating system and therefore MS actions were not to be considered as competition in a different market but simply innovation in the existing OS market. Applications like Calculator had been part of operating systems for well over a decade by then and no-one was shipping any OS without one so there really was not a basis for comparison. Browsers, however, were completely new. Netscape, the first widely adopted consumer grade browser, seemed to be doing very well as a stand-alone application. From today's point of view, you could argue that no operating system would ever ship without a browser but that was not clear at the time. A similar idea would be, in say 20 years, BitCoin lockers becoming an integral part of operating systems. Not obvious today, at least not to anyone outside the niche community of enthusiasts.
Clearly, the courts got it wrong, in that browsers are part of the OS today (just as much as the Calculator). However, MS' ability to put Netscape out of business really did slow innovation down overall for a really long time. It took a long time for the market to correct itself and have the better products win. In fact, it took another monopolist (Google) trying to protect its business in another market to come in and accelerate the pace of innovation.
TL,DR: Courts shouldn't be in the position of deciding technology vision. Not because they do not have noble intentions but because they do not have the expertise.
Sure, that is the role of the courts. However, in this case, that distinction rested on the definition of what constituted a certain peice of technology and the ability to predict how that technology was going to evolve. The courts had no way of knowing the answer to this question. To their credit, I honestly doubt the companies themselves even knew the answer at that time.
This situation was very different than when an oil company uses their monopolistic position in refineries to choke competing exploration and retail companies. Or when a manufacturer of telephone equipment uses the profits from its monopoly in that business to drive out competitors in its telephone service business. Clearly, in these scenarios, it was clear (and remains clear) that the monopolists were using resources from one business where they were clearly dominant to out-compete other companies in separate (even if adjacent) businesses.
Technology is a very tricky area for the law largely because it is fast changing. Situations are cropping up far faster than the laws can be modified to address them and so the courts are pretty much forced to sand-off the edges of existing statutes that were designed for other situations and hope for the best.
You seem to be saying that the evolution of technology over the next 20 years had something to say about whether Microsoft was abusing a monopoly situation at the time of the trial. I don't think that's a valid way of applying the law.
Furthermore, a big part of Microsoft's motivation for making the browser "part of the OS" was exactly to try to blur that line for the court. I am therefore highly skeptical of using "it's now part of the OS" as a reason that the court got it wrong.
Since Windows, for all intents and purposes, was a monopoly, a huge part of the discussion was about whether IE was an integral part of the operating system and therefore MS actions were not to be considered as competition in a different market but simply innovation in the existing OS market. Applications like Calculator had been part of operating systems for well over a decade by then and no-one was shipping any OS without one so there really was not a basis for comparison. Browsers, however, were completely new. Netscape, the first widely adopted consumer grade browser, seemed to be doing very well as a stand-alone application. From today's point of view, you could argue that no operating system would ever ship without a browser but that was not clear at the time. A similar idea would be, in say 20 years, BitCoin lockers becoming an integral part of operating systems. Not obvious today, at least not to anyone outside the niche community of enthusiasts.
Clearly, the courts got it wrong, in that browsers are part of the OS today (just as much as the Calculator). However, MS' ability to put Netscape out of business really did slow innovation down overall for a really long time. It took a long time for the market to correct itself and have the better products win. In fact, it took another monopolist (Google) trying to protect its business in another market to come in and accelerate the pace of innovation.
TL,DR: Courts shouldn't be in the position of deciding technology vision. Not because they do not have noble intentions but because they do not have the expertise.