Microsoft Brief

Ongoing trial coverage of U.S. v. Microsoft, and what it means — if anything — for you. This week: The Integration Gambit


Five weeks into the Microsoft antitrust trial, Silicon Valley’s most perplexing ontological puzzle is once again before the court. Is a browser part of an operating system, or isn’t it—and does Microsoft have the right to combine the two?

The question is the most important and most controversial issue in the case. There is no better example of Microsoft using its existing monopoly in desktop operating systems to expand into new markets. Or, to put it another way, there is no better example of how Microsoft used its incredible distribution network, the Windows operating system itself, to create a fantastical amount of market share for a product that no one actually wanted.

The oddest interview of my professional life concerned just this question. In March, I phoned up Microsoft product manager Dave Fester and asked him to explain Microsoft’s definition of “integrated.” You see, at the time, Microsoft was allowed to “integrate” but not “bundle” features into their operating systems. (This was all spelled out in an official agreement in 1994, the infamous consent decree.) We didn’t have long, so Fester skipped right to the good part: Windows 95 and Internet Explorer are one and the same product, he said. The logical and verbal contortions of the next 20 minutes could have landed him a leading role in “Alice in Wonderland III.”

I was particularly amused by his finale, in which he asserted that because, in fact, the browser is actually the operating system and vice versa, Microsoft could have shipped Internet Explorer 3.0 under the name “Windows 96.” (The only reason they didn’t, he said, is because Microsoft had come out with Windows 95 recently, and MIS managers don’t like to upgrade their operating systems too frequently. Let no one say Microsoft doesn’t understand its customer.)

The takeaway: Windows 95 and Internet Explorer are the same product because Microsoft says so. The company shipped them together, and it wouldn’t let the box makers use Windows 95 without Internet Explorer too. When Microsoft famously told Judge Jackson it couldn’t remove Internet Explorer without damaging the operating system, that was only because the company had arbitrarily redefined several operating system files as Internet Explorer files. (This was confirmed to me at the time by Fester, by independent software columnist and expert Brett Glass of Laramie, Wyo., and by an employee of a Silicon Valley systems manufacturer that licenses Microsoft software.)

Later, of course, when Microsoft came out with Windows 98, it did a much more credible job of combining the operating system and browser into one product. In Windows 98, browser and operating system code are reportedly all mixed up together, and users can launch applications, open local files, and stroll the Internet from a single browser-like interface.

Captain, integration has been achieved. But it turns out that’s not enough. In June, the U.S. Court of Appeals ruled in a separate case that Microsoft was perfectly within its rights to combine the browser and Windows 95, so long as there was a benefit to customers. At the time, newspaper reports bulged with quotes saying the ruling had ripped the heart out of the DOJ’s new case.

Hardly. This week the DOJ made a strong argument that integration does not benefit the customer. A parade of witnesses—IBM executive John Soyring, two expert witnesses (a former DOJ economist and a software firm president), and various third parties—said in their written testimony that many customers had specially requested Netscape Navigator, not Internet Explorer. Other customers said they didn’t want any browsers on their systems, either because of hardware constraints or because their employees weren’t supposed to use the Internet.

In addition, noted Soyring, when Internet Explorer is automatically bundled on systems, it restricts choice because of technical difficulties. Box makers are unlikely to support Navigator as well, since that would mean additional training and support costs for them. And even though Navigator can now be downloaded over the Internet for free, Windows users are discouraged from adding it because running two browsers takes up a lot of memory and slows down applications.

This week’s courtroom drama uncovered another way the Microsoft monopoly has hurt customers: An internal Microsoft memo released this week reveals that Microsoft’s operating system prices have increased over the last 10 years, while the price of everything else in a PC has decreased—and furthermore, that Microsoft is considering charging its users an annual fee. How’s that for a benefit to the customer?

Microsoft is going to lose this case.


TRIAL TIMELINE (the trial recesses Fridays)

11/2 – 11/5 Apple‘s Avadis Tevanian testifies that Microsoft threatened to stop developing Office for the Mac unless Apple used Internet Explorer instead of Netscape.

11/9 – 11/12 Intel testifies that Microsoft bullied Intel into scaling back its software and Internet projects, partly by threatening not to support its chips. The DOJ shows more ludicrous videotapes of Gates claiming not to remember Intel’s work on software. (Hint to Bill: Microsoft’s streaming-video NetShow was originally developed by Intel.)

11/16 – 11/19 IBM‘s John Soyring testifies that Microsoft contracts and marketshare discouraged software companies from writing applications for OS/2. Soyring and others argue that browser integration does not always benefit the customer. Meanwhile in California, a judge rules in Sun‘s favor in the ongoing Microsoft-Java court case, and Soyring points out that Internet Explorer propagates Microsoft’s non-compliant version of Java.

Microsoft argues that it is not a monopoly and shows off Red Hat‘s Linux to prove its point. (Too bad Red Hat’s market share is infinitesimally small and its Unix-based product not what most people would consider a user-friendly desktop OS.) An internal Microsoft memo reveals that Microsoft’s operating system prices have increased over the last ten years, while the price of everything else in a PC has decreased. The memo also reveals that Microsoft is considering charging users an annual fee for its software. Now we know!

Cate T. Corcoran has been writing about Microsoft since 1994. She recently completed a six-month series on the company and antitrust issues, called “Vs. Microsoft,” for TheStreet.com.