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Special report: MS on the Netscape-AOL deal

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MS on Trial Microsoft evidently considers that its strongest argument concerns AOL's acquisition of Netscape, since it led its document with this. Microsoft claims that "the relative usage shares" of IE and Navigator "are not markedly different from when the case began [in May 1998]". Microsoft then goes on to claim that therefore this "certainly does not establish Microsoft's exclusionary conduct". That's deliberately misleading. Recent independent studies suggest that Navigator usage has sunk to 25 per cent. Microsoft was very concerned that one of the secret documents from the Netscape-AOL-Sun deal that it managed to see had AOL vps Miles Gilburne & Barry Schuler saying that "The 4.0 release [of AOL software] will be the last Microsoft version and that a Java version of that software would be produced in 18-24 months". A real reason for Microsoft not liking the deal is that it will make it more difficult for MSN to become profitable and dominant. Microsoft appears to have seized this side issue that has no special relevance to Microsoft's previous conduct, which is the subject of the Complaint, perhaps because it can go down claiming that the court ignored the "main issue". Future competition is just not relevant, and should not be considered as special pleading for lenient treatment. One gets the feeling that Microsoft is cross that its carefully crafted plans to eliminate Netscape completely have been thwarted by the AOL deal. Competition for Windows, as Microsoft calls "AOL's effort", should not worry Microsoft if it really has confidence that Windows is a good product. Microsoft made a great play during the evidence that Navigator was not componentised, but suddenly declared that it is componentised . In a deposition on 29 October 1998, Microsoft was told by Barry Schuler of AOL that Netscape had delivered to AOL in September 1998 a beta of a componentised version of Navigator. Microsoft even sells beta software and expects it to be reviewed, so it can hardly claim that another vendor's beta cannot be recognised. Microsoft talks about "getting [AOL/Netscape] software into the hands of consumers, but there is a big difference between carpet bombing and distributing software pre-loaded on a new PC. "AOL's vast distribution apparatus" will be used to distribute Java, Microsoft moans, and there are plans to develop a browser "with no Microsoft content" for use with AOL's "proprietary software" [there is no mention of Windows being proprietary, of course], so that "the operating system underlying their Web browsing software will be significantly less important to consumers". The moan continues: "IBM has begun efforts to integrate its Notes/Domino software with Sun's Java". But of course, the case is not about future possibilities that may or may not happen. Of course, AOL is itself threatened by the rise of free access to the Internet, and the number of Navigator users has also fallen. With a straight face, Microsoft suggests, quoting Merrill Lynch, that "the big challenge to Microsoft's operating system franchise is that there would be many computers that are not running Windows (that are simply net devices) on which AOL could effectively be the operating system". Microsoft "proof" that Microsoft does not control the browser market, which Microsoft manages to discuss without conceding that there is such a market, is that AOL has "the ability to determine what Web browsing software will be used by approximately two-thirds of all Internet users in the US". Since the future is not relevant to the case, this is rather good evidence of Microsoft's monopoly in the market, although Microsoft does not point out in the section where this is discussed that AOL is locked into IE until 2001, that the great majority of these users will then be using Windows 98, and that many would not drop IE whatever AOL did. Despite the hostility between AOL and Microsoft, there are mutual advantages in continuing the present arrangement whereby AOL is "promoted" by Microsoft and AOL "prefers" IE. Microsoft's whinge about not harming Netscape goes on for 20 pages, and gives a highly challenging interpretation of the facts. Microsoft all but calls Netscape's Marc Andreessen a liar over the famous minutes he took at the 21 June 1995 meeting when Microsoft denies it made the market division proposal. Microsoft's take is amusing: it was "encouraging [sic] Netscape to utilise the Internet-related functionality of Windows 95" and "suggested" that Netscape "reconsider" a previously discussed arrangement whereby Microsoft would license Navigator for Unix and the Mac (which seems to be an admission of a market-splitting proposal) since Microsoft was also suggesting that Netscape "made much broader use of the Internet-related functionality in Windows 95. Microsoft's final claim is that it provided an unusually high level of technical support to Netscape", which was not Netscape's evidence. ® Next part: The threat from Open Source and Linux 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

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