LETTERS TO THE EDITOR:  AOL/Netscape vs. Microsoft  

01/30/02

Our comments on the AOL suit on behalf of its Netscape acquisition against Microsoft stirred up some reader comments.  We’re printing a few here.  

Amy,

Thank you again for the thought provoking analysis and commentary.  I have one comment in response to your statement: "AOL may be able to prove that Netscape suffered a financial loss when Microsoft was able to convince the market that browsers should be free."

I'm frustrated that so many writers on this topic forget that it was in fact Netscape that entrenched the practice of offering browsers for free.  For years Netscape, alone with its own monopoly atop the browser market, highly touted their "free software" strategy, using it very publicly as a sharp marketing tool against Microsoft.  This message gained significant traction with press and analysts, and Netscape rode that train for all it could in their attempt to establish the free browser as the "new client" alternative to Microsoft's expensive and monopolistic OS.

Microsoft entered the browser market late, and well after Netscape's free software model was established through multiple versions of its browser software.  It was Netscape's past behavior and highly visible marketing, and the expectation that it entrenched with end users, that forced Microsoft to offer IE for free as well from the very start.  Both browsers remained free and highly competitive for a good deal of time during the ensuing "browser wars".  It wasn't Microsoft's price for IE that damaged Netscape, because it was unarguably Netscape that set the price.

It wasn't until Netscape, as a public company, started to report dismal earnings that they began publicly complaining about IE being free.  I suspect that Netscape had intended to eventually start charging for their browser in order to leverage their intended "monopoly" on browsers in order to force users to suddenly pay for something that they had become dependent upon for free (drug dealer strategies).  Unfortunately, they had so firmly established a pricing precedent, and forced Microsoft to follow, that Netscape's broken business model finally caught up with them and they've been attempting to re-write history ever since in order to make themselves look like a victim.

As a result, Microsoft should be able to easily prove that any damages that can be claimed by Netscape shouldn't be for financial losses to its browser business, but rather should be for losses to other businesses that occurred as a result of loss of *market share* in the browser business.  I suspect that such losses would be extremely difficult to prove or quantify.

Frank Nutt  

Frank:

You're right and this is a very important point.  It’s Netscape and not Microsoft that decided browsers should be priced at Free. 

Amy  

And from another subscriber who chose to be anonymous.

Amy:

Re: Software companies should be about building great software, not about hiring great lawyers and winning cases.

Mr. Gates should have thought about that when he told Steve Case: "We can either buy you now or bury you."

Microsoft should have thought about what others might do in reaction to the threats of what Microsoft and its management did and said. Microsoft, as a convicted abusive monopolist, has tried to destroy all who stood in their way: Word Perfect, Lotus, Netscape, Novell, Digital Research, and others. Their track record is clear for all to see.

Neither company is a great friend of the consumer - tried to get technical support from either one of them lately? Ever hear all the horror stories the damage that AOL software has caused to their customer's PCs? Ever count up the number of times that you had to reboot because Microsoft's software didn't run as promised? Or, how much time we wasted over the years while Microsoft tried to get its Windows software to work?

The decision to bring suit against Microsoft is a major one for AOL TW and was surely approved by Steve Case himself together with the other top AOL TW executives.  A suit like this, once filed, takes on a life of its own and neither party is in control.  So, AOL TW must think that it is in a life or death struggle against Microsoft - and Microsoft's ambition to control the Internet and the future of Digital Media.  And, they have bet a large stake on asking the courts for relief from Microsoft's monopolist behavior.

Anonymous Opinions Reader  

Anonymous Reader:

I see that you take the AOL lawsuit as a much more serious and fundamental matter than I do.  As always, I respect your opinions, even when we don't see eye-to-eye.

I see it as a kind of logical extension of the Jackson ruling (and I suspect more will follow).  If Microsoft has been ruled a monopoly by a court, and others can claim to be damaged by that monopoly, they may be able to collect damages.

My problem is that monopolies are traditionally judged in narrow, rather than broad, markets, so this would change the rules.  Also, I think that from an economic perspective, injunctive relief has little or no meaning.  A court could provide it, but I don't think it would have any desirable results, from anyone's perspective.  I do think damages are possible, if AOL can prove that Netscape was damaged and how. 

Amy  

Amy:

What else could AOL TW do to keep Microsoft from running roughshod over them?

These various lawsuits, which Microsoft's arrogance permitted to run their course instead of settling like Intel did, may help to make them behave a bit.

If the AOL TW suit looks like it's going well, Sun and Apple may also follow suit.  If there were a Word Perfect company left, they could also consider doing something.

So, Microsoft has opened Pandora's Box and is paying the price.

The office equipment company I worked for used to have our antitrust lawyers out once a year to instruct our executives including, our dealer managers, what we could do and say as well as not do and say.  We heard so much about Coca Cola's antitrust adventures that I could have been an expert witness. (We had the same law firm).

But Microsoft, in their arrogance thought that they could ignore the law - "the technology industry can't be regulated - it moves too fast".  So, now they reap what they sowed.

The tragedy is that Microsoft is a great company - they created more wealth than any other company, ever.  And it's not only their own employees who became wealthy but employees of all the companies that were started to use Microsoft's products: Compaq, Lotus, Novell, Dell, etc. Real wealth.  But, as my Mother used to tell me: "Pride goeth before the fall."

Anonymous Opinions Reader  

When I asked our Anonymous Opinions Subscriber for permission to print his letters, he answered with yet more comments (and permission).

AOL TW considers Microsoft a, possibly the, competitor.

"AOL can only infer that Microsoft's purpose in serving this latest subpoena is again to harass and burden AOL, one of its major competitors," AOL lawyer James W. Draughn wrote in a Jan. 11 letter.    http://www.msnbc.com/news/693376.asp?0dm=C12QT

The rest of the computer and the media (content) industry won't be able to stand on the sidelines and watch these two titans wage war.

Every company will have to commit one way or the other.   Like President's Bush re: supporting terrorism. 

How many friends does Microsoft have in the computer industry? Let's ask about these big boys for starters: IBM, Sun, Dell, Intel, HP, Compaq, Apple, Oracle, Computer Associates.  Out of that group, maybe Dell and Compaq would stand up for them - and, I'm not too sure about Compaq. 

Sun and Oracle have spoken loudly and clearly about their distrust of Microsoft.  IBM is putting millions into developing Linux as a Windows alternative.  Intel has poured millions into Linux startups.  HP, Compaq and Dell have had the boot of Microsoft on their wallet for years because of Microsoft's monopoly (now proven in court) of the desktop operating systems market.   Microsoft had to put money in Apple to keep them alive so that Microsoft could claim that they had competition in the days before Linux; I suspect that Apple resents having to ask for that money and detests Microsoft for stealing their ideas about computer interfaces. Computer Associates would like Windows just to go away - so inept have they been at carving a market in the Windows arena.

Four or five years ago Microsoft had tremendous trust in the industry. That trust is gone.  Microsoft's inability to produce reliable software or products with adequate security coupled with their conviction as an abusive monopolist has eroded the trust in them.

Microsoft the accused should have the right to see and hear their accuser. But Microsoft's ability to destroy companies by withholding products and funds makes it difficult to pry the truth from some of their industry dependents.

Anonymous Opinions Reader  

Anonymous Opinions Reader:

There are some pertinent points here – and some ancient history. 

I think you should take Apple off the table.  They need Microsoft much more than Microsoft needs them.  It’s silly for Apple to hate Microsoft over the success of Windows.  First of all, Apple didn’t invent the idea they borrowed it from Xerox.  Secondly, they had years in which they could have licensed it and made themselves the market owner; they chose not to take that path.  Thirdly, Apple is dependent on Microsoft for its Office software, which is one of the only serious, mainstream business products, outside the graphics market, which is supported on the Macintosh platform.  That isn’t Microsoft’s fault – it’s Apple’s, for failing to attract more developers to its platform (and yes, we could go another round about that’s because Microsoft has an OS monopoly, but back in 1984 when the Mac got started, Windows wasn’t even very interesting).

Let’s keep in mind the point you so ably made.  The platform Microsoft created enabled an entire industry (actually many industries) to prosper.  Remove them from the equation and the personal computer industry may never have been very important or reached critical mass – or it may have taken years longer to get there.

I think Microsoft troubles you because they refuse to behave in the conservative, lawyer-driven way, you describe.  The way, for example, IBM behaves.  Microsoft has grown from a start-up to a BigCo without ever quite growing up and so it’s aggressive, perhaps adolescent, behavior gets it into situations BigCos would never permit.

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