Special report: MS on the threat to its position

It's three-pronged, apparently

MS on Trial Having removed the threat of competing operating systems through OEM licensing moves, Microsoft spends most of the technical part of its claims in being worried by what it calls three middleware technologies: Netscape's browser; Java; and Lotus Notes/Domino (about which it has almost nothing to say). Considerable attention is devoted to attacking AOL and claiming that the AOL-Netscape-Sun deal proves that there is competition. For many observers, the key issue in the trial is Microsoft's attempts to kill Netscape, but the issues are in fact much broader and centre on Microsoft's illegal anti-competitive actions generally. IBM and Sun are castigated as well-financed competitors who have tried to develop alternatives to Windows (OS/2 and Java) - but without covering costs, it would appear. Microsoft's relations with Intel receive 14 pages about the "routine efforts" to co-operate on technology, but are included as an attempted refutation of the black character reference that Steve McGeady gave Microsoft, pushing home that McGeady "was not testifying on behalf of Intel" and that his testimony "contradicted" that of Ronald Whittier. In an entirely irrelevant section, Microsoft wails that "Non-PC devices and more compact operating systems ... will pose an increasing threat to Windows." The evidence cannot be considered because it is about future possibilities and the trial is limited to dealing with past iniquities.

Browsers and Netscape The claim that as "Web browsing software is given away at no charge, there is no separate market for 'Internet browsers' in any meaningful sense" is untrue. Microsoft refuses to recognise the market for browsers. Opera, for example, costs $35 and is now firmly established at number three world-wide, according to BrowserWatch. But there again, Microsoft is quoting Schmalensee's evidence, an economist not known in computer industry circles. Of course Microsoft did initially charge users for IE 1.0 for Windows 95, since it was included in PlusPack for $60, we seem to recall. Netscape used to sell its browser until Microsoft pre-empted this. The report even says that "Netscape has distributed a significant quantity of its Web browsing software through the retail channel" and this is put at 1.7 million copies for 1996 to October 1998 by PC Data. Microsoft tells its own version of Netscape's business plan which doesn't quite correspond with, well, Netscape's business plan but claims that Netscape's plan was just to sell server software and generate web site traffic. A myth has developed that Microsoft decided to integrate IE because of Navigator. A glance at the history of MS-DOS and Windows development is sufficient to show that loose integration has nearly always been done for each new technology as it comes along. Sometimes Microsoft just steals the code, as it did with Stac's compression software. At other times it buys in software, as it did with Mosaic to develop IE. It would therefore be wrong to doubt that Microsoft had not decided to incorporate browsing before Netscape produced its first beta, but it was the subsequent success of Navigator that caused Microsoft to be much more devious about how the "integration" was carried out, and there can be no doubt that it was done in a way that was designed to "kill Netscape". The proof that Microsoft was devious in this way is seen in a study of the quite different functionality combined in DLLs. Although some evidence was produced in court, it is a difficult argument for a non-technical judge. Microsoft claims that its increase in market share for IE results from "improvements" in the software, but this is rubbish of course: it was its deals with OEMs that counted, and in this it used its well-oiled instruments of corporate torture to extract agreements. Probably less than 10 per cent of browser users had read any comparative review of browsers, so claiming that the "acceptance" of IE was the result of user choice is deliberately misleading. Microsoft also claims that "the biggest factor in the increasing popularity of IE relative to Navigator was AOL's incorporation of IE into AOL's proprietary access software" which contradicts its arguments about how IE quality convinced users. A childish trick was used by Microsoft when it quoted Fisher saying that Navigator had lost 30 per cent market share during the evidence, while Schmalensee claimed that Navigator had tripled the number of users. This was particularly stupid and an attempt to mislead the court. It is sad that Microsoft still tries to claim that its actions "have not foreclosed Netscape's access to distribution channels". In view of the trial evidence, this is plainly untrue. A year ago, Microsoft says, OEMs were the major source of the browser, followed by an ISP or online service subscription. But according to Netscape's comments during the due diligence for the AOL acquisition, some 50 per cent of Netscape software in the US had been obtained by downloading. One of the problems with browser usage statistics is that very little is known as to how many browsers users have and use, and their usage patterns. Microsoft waffles on about users' ability to make Navigator the default browser, knowing that in Windows 98 this is not completely achievable since users would find their preference overridden by IE, coupled with harassment from system's messages persuading them to switch back to IE. Microsoft claims that it did not enter into exclusive dealing with ISPs and online service providers, and starts its defence with the 24 unsuccessful channel bar ICPs. No argument there. There are problems with the platinum agreements however since a condition was that the ICPs would only distribute IE. Ah, says Microsoft, it only had a de minimis effect. They would say that, wouldn't they? ®

Next part: MS on the Netscape-AOL deal Other sections Microsoft's antitrust defence The three threats to Microsoft MS on the Netscape AOL deal The threat from Open Source and Linux Back to intro Complete Register Trial coverage