Microsoft Windows to Include Instant-Messaging Service

Microsoft Corp. said Monday that it plans to bundle an instant-messaging service in a new version of the Windows operating system, alarming antitrust authorities and challenging the leading messaging service by rival AOL Time Warner Inc.

Windows XP, due in October, will include Microsoft Messenger, which offers e-mail conversation, along with audio and video capability.

Microsoft’s announcement comes as the Redmond, Wash.-based maker of the dominant desktop software continues negotiations with AOL, the top Internet access provider, about a new deal to put each other’s software in their programs.

AOL wants consumers to easily access its software by having Microsoft package AOL into Windows XP. In exchange, Microsoft is asking AOL to stop complaining to antitrust officials that the inclusion of Microsoft’s instant-messaging program is an illegal extension of its desktop monopoly.

“Microsoft may be taking steps to protect its monopoly and take over a lot of other products in its wake,” said Iowa Atty. Gen. Tom Miller, who is leading the states suing Microsoft with the Justice Department. “Our concern is that history may be repeating itself.”

A federal appeals court is expected to rule shortly on a lower court’s order to break Microsoft in two for antitrust violations.

“These companies are kind of mortal enemies right now,” said analyst Rob Enderle of Giga Information Group. Even if an agreement is reached in the talks, it could well end up in a court dispute over interpretation, he said.

Microsoft is trying to use its desktop dominance to gain inroads into the instant-messaging market dominated by AOL. AOL has been reluctant to open its messaging service to customers using Microsoft’s program.

AOL downplayed the significance of the talks, saying many of the issues are not as critical to the company as they were four years ago when the original deal was inked.

Thanks largely to that presence on the Windows desktop, AOL grew into the nation’s No. 1 Internet service provider and now serves 29 million subscribers, far more than the 5 million who use Microsoft’s MSN. In addition, AOL now has separate agreements with computer makers such as IBM Corp., Hewlett-Packard Co. and Gateway Inc., ensuring that the AOL logo already appears on many computers, without help from Microsoft.

In recent weeks, AOL has been seeking help from members who are beta-testing Windows XP to see whether the two products are compatible.

The rivalry between the two technology giants dates back several years, to when Microsoft founder Bill Gates reportedly threatened to swallow or crush the then-tiny AOL.

In March, AOL lobbyists visited Capitol Hill, warning congressional staffers that Microsoft’s plans to integrate instant messaging would be anti-consumer and anti-competitive.

It’s a little bit of payback for AOL, which was the target of a similar lobbying campaign last year when Gates visited Washington to speak out against its pending merger with Time Warner. At Microsoft’s urging, the Federal Communications Commission imposed conditions that could force AOL to make its dominant instant-messaging systems operable with other systems if it wants to offer advanced services in the future.