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EDITIONS
Wednesday, 28 October, 1998, 15:39 GMT
USA versus Microsoft: the first week
Bill Gates in front of Microsoft packaging
Bill Gates: accused of getting interested in Internet only since 1995
By independent computer industry analyst Graham Lea

So far Netscape CEO James Barksdale's cross-examination has taken two-and-a-half days, after a day-and-a-half of opening statements by the lawyers from each side.

Barksdale is the first of 24 witnesses, so it looks very likely that the case may extend far beyond the originally anticipated six to eight weeks. Judge Jackson has decided that the court will operate on a four-day week, and not sit on Fridays.

Barksdale has not been shaken by John Warden's cross-examination of his rambling, repetitious 127-page deposition that was entered into evidence.

In a motion filed with the court at the end of the first day, Microsoft asked that some 50 paragraphs of his written testimony be excluded on the ground that they are hearsay evidence. The Department of Justice filed its opposition the next day.

Both sides have indulged in some attempts to rewrite history. For its part, Microsoft has tried to suggest it was fully committed to the Internet long before this was the case. The key events are, according to Barksdale's testimony, that Netscape released the first beta version of its Netscape Navigator 1.0 browser in October 1994 and that in December 1994 the final version was released.

The same month, Microsoft licensed Mosaic from Spyglass, the University of Illinois' contractor to promote Mosaic.

Netscape likes to give the impression that Andreessen invented browsing, but in fact browsers had been developed at CERN in Switzerland, downloaded in Illinois, and then further developed by Andreessen and others.

In January 1995, Microsoft had just four people working on developing a browser. It was not until May 1995 that Bill Gates told Microsoft executives"Now I assign the Internet the highest level of importance."

Following increasing media criticism that Microsoft was falling behind in its adoption of the Internet, in December 1995 Gates announced that Microsoft was now taking the Internet seriously, and that its Internet Explorer browser, developed from Mosaic, would be free.

In June 1995 there were what Barksdale has described as "play-ball-or-else" meetings between Netscape and Microsoft. Netscape was concerned to get from Microsoft the same technical information that Microsoft distributed to all software developers to enable their products to work with Windows.

Barksdale was told that Microsoft wanted Netscape to stop development of a Windows 95 browser (which was seen as the largest potential browser market), in return for Microsoft agreeing to give Netscape a clear run at the relatively small browser markets for Windows 3.x, MacOS and Unix.

Microsoft was also willing to make an investment in Netscape, and wanted a seat on the Netscape board. Netscape refused the illegal market-splitting suggestion, Barksdale said, and incurred Microsoft's considerable wrath.

Barksdale's testimony contains much detailed evidence of the predatory practices that Microsoft used against Netscape. He describes how "Microsoft began to use its market power to extract exclusionary deals with many of the largest [PC manufacturers and Internet Service Providers]", threatening Netscape customers such as Compaq that if it tried to replace the Internet Explorer icon with the Netscape Navigator icon on its Presario range of computers, Microsoft would withdraw Compaq's Windows 95 licence.

Microsoft claims that Netscape is a whiner and poor competitor, while Barksdale says that from 1996, he began to receive reports of "Microsoft providing free products, free services, free advertising, and even in some cases substantial financial payments for each copy of Netscape Navigator removed from an installation and replaced by the free Internet Explorer".

The result was that Netscape found itself cut off from its markets, and so had to change its business plan to make money in other sectors: it could no longer charge for Navigator because Microsoft had decided to cross-subsidise its IE development costs from other revenue.

In this way, Barksdale says, Microsoft cut off Netscape's oxygen supply, by using its Windows monopoly to deny Netscape access to markets, and by cutting off Netscape's sources of revenue by paying key Netscape customers to change to Internet Explorer.

In Barksdale's cross-examination, Warden has been unable to shake Barksdale's story. Warden tried to make much of a 3:00 am email from Jim Clarke to two Microsoft executives in December 1994 in which he tried to revive the possibility of a collaboration because he was concerned about whether his investment in Netscape would be recovered.

Barksdale said that Clark had described the email as "a moment of weakness", and noted that he did not know about it until recently.

Warden has also tried to say that Clark's email and subsequent contacts between Netscape and Microsoft were part of a pattern of negotiation, but Barksdale denies this, saying that Netscape needed technical information to make Navigator work with Windows 95 but which was held back from Netscape because of its refusal to stop Navigator development for Windows 95.

The most important part of Barksdale's account is where he alleges that at a meeting on 21 June 1995 Microsoft tried illegally to split the browser market with Netscape. At one point, Barksdale replied firmly to an accusation from Warden that he was lying, saying that: "I was in the meeting. I know what happened. I was a witness. You weren't."

In this case, the Department of Justice has to convince Judge Jackson that there is a preponderance of evidence that Microsoft exhibited a pattern of behaviour that tended to distort the market illegally. So far, the DoJ has made a good start.


Graham Lea is a leading computer industry analyst specialising in Microsoft, who will be following the case for News Online - his views do not represent those of the BBC.

See also:

28 Oct 98 | Microsoft
28 Oct 98 | Microsoft
19 Oct 98 | The Company File
28 Oct 98 | Microsoft
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