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Last Updated: Friday, 30 May, 2003, 11:48 GMT 12:48 UK
Q&A: Microsoft vs AOL
Q & A graphic
Microsoft has brought another of its multiple legal battles to an end by paying $750m to settle a lawsuit brought by media giant AOL Time Warner. BBC News Online looks at what it means for both companies, and for computer users at large.

I'm getting a bit bored of all this Microsoft court stuff. Aren't we done yet?

Not quite. Certainly the main case brought against Microsoft by the US government is pretty much over - Microsoft was found to have abused its market dominance, although the settlement agreed is widely seen as little more than a slap on the wrist.

But this one goes right to the heart of the original issue. The government's case grew out of allegations that Microsoft was using its dominance of the personal computer software market to shut Netscape - then the undisputed king of Web browsers - out in favour of its own software.

Years down the line, Netscape is now part of media giant AOL Time Warner, and 95% at least of Windows-based computers use MS's Internet Explorer (IE). So there's an element here of shutting the stable door once the horse has bolted.

The case, brought by AOL in January 2002, called both for financial penalties and the restoration of competition in the browser market. The settlement has accomplished the first; but if anything, it has cemented Microsoft's control over the second.

I'm still not clear what this means to me as an AOL subscriber, though.

Not a great deal, initially, although the $750m Microsoft is paying will make a small dent in AOL's $26bn mountain of debt.

In the longer term, the two have agreed that AOL can use Microsoft's Internet Explorer browser technology for seven years without paying a penny for it.

That almost certainly means that IE, not Netscape or any of its multifarious variants, will form the core of the web experience for AOL subscribers.

Bill Gates
More importantly, it ups the odds on AOL shifting its focus to Windows Media, Microsoft's proprietary music and video system, for all the audiovisual offerings that emanate from its vast libraries.

Till now, AOL has been careful to use technologies from Realnetworks, by Real, or Apple's QuickTime, which guarantee much better cross-platform compatibility.

Hold on a minute. That doesn't sound like much of a punishment.

It isn't. This is a win-win deal for Microsoft.

Admittedly, it has to cough up $750m, but that couldn't really be described as a hardship for a company that has almost $50bn in the bank.

And it has to give away access to IE.

But since that's exactly how Microsoft built IE into the dominant browser on the Windows platform in the first place, and fits perfectly into its famous "embrace and extend" strategy of leveraging its monopoly into new markets, that's not much of a burden either.

Apple CEO Steve Jobs with Apple's flat-screen iMac computer
Apple could suffer from the AOL deal
Arch-rival Apple's widely-acclaimed move into the music selling space earlier this year has attracted a lot of publicity, not least because - for the next few months at least - it's only available on Mac computers, not Windows ones.

By trying to muscle its technology into place instead of the open standards Apple and other services are using, this could count as the first significant shot in the battle to dominate the audio and video market as well.

So is that it, then? It's all happy times ahead for Bill Gates and his friends?

Not quite. There's still one hurdle - and no-one knows quite how it's going to play out.

The European Commission (EC) has yet to rule on its own Microsoft anti-trust case.

But unlike the US Justice Department, the case is not limited to the past - in other words, to the browser wars.

Nor have the people in charge of the European investigation changed, as happened when the Bush administration took over from Bill Clinton's in January 2001.

The EC's investigation is all about the use of the desktop monopoly to move into other areas - specifically those of servers and audio/video.

So the eurocrats are likely to pay close attention to deals like this, as well as to allegations that Microsoft uses its monopoly to keep other operating systems - such as the open-source Unix variant Linux, or Apple's Mac OS - out of areas it has colonised.

If the Commission decides Microsoft is guilty, the firm could be fined up to 10% of its annual turnover.

Given that Microsoft's sales in the year to June 2002 were $28bn, that makes for a fine of close on $3bn. Rather more painful, but still not exactly impossible to bear.


SEE ALSO:
Microsoft settles lawsuit for $750m
29 May 03  |  Business
Browsers fight it out
08 Mar 03  |  Technology
Xbox set sights on gaming crown
23 May 03  |  Technology
Microsoft opens up Windows
22 Apr 03  |  Technology
Microsoft's focus shifts to Europe
04 Nov 02  |  Business


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