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Thursday, October 29, 1998 Published at 00:34 GMT

World: Americas

AOL tells of Microsoft 'threat'

AOL says fear motivated it to do a deal with Microsoft

A senior vice president of America Online has testified that he feared his company would be put out of business if it did not use Microsoft's Internet browser.

Speaking in the second week of the landmine antitrust case of the US Government versus Microsoft, David Colburn said the decision to go with Microsoft's browser was made partly out of fear.

He said Microsoft controlled the "desktop," which contains the items seen when a personal computer is turned on, and was launching its own Microsoft Network (MSN) as a direct competitor to AOL.

"For the first time we were faced with a competitor, MSN, which was going to be on the desktop at no cost," Mr Colburn testified.

"Their ability to preclude us from the market was very high ... AOL could be enveloped by Microsoft."

Mr Colburn was the second witness in the trial, in which the Justice Department and 20 states have charged that Microsoft illegally used a monopoly in its Windows software to compete unfairly with smaller browser maker Netscape.

The AOL-Microsoft deal

AOL is the biggest single provider of on-line services, with more than 13 million customers.

In March 1996, AOL agreed to integrate Microsoft's Internet Explorer into its software, making it difficult for customers to use other browsers.

In return, Microsoft put an AOL icon in a "folder" on its Windows desktop that contained a list of Internet service providers.

On being cross-examined by Microsoft lawyer, John Warden, Mr Colburn denied that he said Microsoft offered the best technological solution for his subscribers.

He said he agreed to the deal mainly to get prominent AOL placement in the Windows operating system that runs most personal computers.

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