Witness Calls Netscape a Potent Threat
Microsoft Corp.’s economics expert testified that America Online Inc.’s acquisition of Netscape Communications Corp. gives new impetus to competition in software technology that lets computer users browse the Web.
Economist Richard Schmalensee, the last witness at Microsoft’s antitrust trial, said the company’s domination of Internet software technology through its Windows line is more vulnerable as the result of AOL’s $10.2-billion purchase of Netscape, which makes the Navigator Web browser.
“It’s clear the threat [to Microsoft] from that quarter has become more serious,” said Schmalensee, dean of the business school at the Massachusetts Institute of Technology.
The “browser war” between Microsoft’s Internet Explorer and Navigator is far from over because AOL has plans to develop new software in its alliance with Sun Microsystems Inc., Schmalensee added. “At some level, the way to see if a war is over is to see if both sides are still firing, and both sides are firing,” he said.
Schmalensee was called by Microsoft as a final rebuttal witness to dispute claims that the software giant thwarted competition from Netscape by preventing distribution of Navigator, which it regarded as a threat to its domination of personal computer operating software.
Schmalensee said the Justice Department and 19 states have failed to present evidence that Netscape was ever prevented from distributing its browsing software to customers. The fact that Navigator accounted for just 22% of Internet browsers installed in personal computers last year is “no evidence of foreclosure” from the marketplace, he said.
AOL’s agreement to produce new software technology with Sun increases the chance that Navigator and Sun’s Java programming language will present “software platform” challenges to Windows, Schmalensee said. Windows currently powers about 90% of the world’s PCs.
Software developers are now writing applications that allow users to store data on the Internet. Such applications will enable AOL, Java and other platforms to challenge Windows, he said.
U.S. District Judge Thomas Penfield Jackson appeared to deflate the argument when he said to Schmalensee, “If you’ve got Explorer and nothing else, you use Explorer.”
Trying to debunk another theme of the government’s case, Schmalensee said personal computer makers benefit from Microsoft’s requirement that Windows cannot be altered by manufacturers when it is loaded into PCs.
The government contends that by bundling and later integrating Internet Explorer into Windows, Microsoft forced computer makers to choose its browser over Netscape’s.
But Schmalensee likened computer manufacturers’ role in reselling Windows to consumers to “the way a Chevrolet dealer resells Chevrolets” made by General Motors Corp. A car dealer who removes a part of the engine or the headlights would hurt GM and other dealers by eroding the “strength of the brand,” he said.
