Microsoft on Trial: Browser blockade an 'exaggeration'

The government's key economic witness in the Microsoft Corp. antitrust trial Thursday said that although Microsoft used monopoly power to force Netscape Communications Corp.

The government's key economic witness in the Microsoft Corp. antitrust trial Thursday said that although Microsoft used monopoly power to force Netscape Communications Corp. from the market for Web browsers, it was an "exaggeration" to say Netscape could no longer use computer makers and Internet service providers to distribute its main product.

The concession may weaken government arguments the company has effectively blocked Netscape from distributing its product to consumers. But it also capped a morning in which Massachusetts Institute to Technology economist Franklin Fisher attacked the credibility of Michael Lacovara, his inquisitor at the trial.

Lacovara tried to show that, despite exclusive distribution deals between Microsoft, computer makers and Internet service providers, Netscape could still market its browser to consumers at large. The Internet and even deals with computer makers, he said, made distribution easy. He asked Fisher whether it was a "viable channel" for distribution. "I don't know what 'viable channel' means," Fisher replied. "It's not something that makes up for the foreclosure of other channels."

The Sullivan & Cromwell attorney cited merger documents submitted by Netscape that showed "reported client distribution" of 160 million downloads every year, or roughly 1.6 copies of Netscape Navigator for every Internet user on earth.

Another document obtained by America Online Inc. investment banker Goldman Sachs from Netscape showed visitors to Netscape's Web site averaged 261,000 downloads daily at the start of the trial last October. Lacovara suggested that was more than enough for Netscape to succeed.

Fisher conceded the numbers were large, but also misleading. For one thing, he said, many of those downloads may go the same users who upgrade several times a year. What's more, he added, large numbers of downloads aren't successful.

Lacovara insisted that wasn't likely. After all, he said, there were no qualifications appended to those download figures, and the documents were submitted under penalty of law. Fisher, visibly irked, replied that Netscape CEO James Barksdale had already testified that no one at Netscape knew how often "downloads" were successful. Lacovara insisted the downloads had to be successful. Fisher responded tartly. "I expect if they believed those numbers on their face, they'd be talking about big adoption of the Netscape browser," he said. "I don't believe that, I don't believe they believe that, and I don't believe you believe that."

Lacovara volleyed back: "Perhaps I don't, but perhaps I don't for a different reason."

Fisher expanded on his earlier comments: "The question is not whether these numbers are accurate; it's what they translate into." Last February, Microsoft's own executives suggested they translated into literally nothing. Then, Microsoft Vice President Brad Chase conceded that even though millions had downloaded browsers from Microsoft and Netscape, neither channel seemed to be increasing the number of users for either company.

From March 1998 to Sept. 1998, Microsoft documents showed, the number of Netscape users who got their browser from the Web held steady at 6.7 million. Microsoft Internet Explorer users who got their browsers from the Web, meanwhile, actually fell from 2.9 million to 2.8 million over the same period. At the same time, the number of IE users soared 48.1 percent from 13.5 million to 20 million. Netscape users edged up 7.4 percent from 27 million to 29 million over the same period.

So where'd all the browsers go? They were used to upgrade older versions, Chase reasoned, and they went overseas. Some users may have decided not to use the browsers they got, he said, or perhaps their phone lines were interrupted during download.

Excerpts from a March 1998 deposition of Microsoft executive Joe Belfiore reinforced the testimony. "There's tons of feedback that downloading takes too long, is too hard. The number of hours that it takes to download these components is incredibly discouraging to people, often fails and the result is people don't get improved user experience at all."

Lacovara returned to another section of the documents a short time later. Netscape executives last autumn estimated that 22 percent of computer makers distributed the company's browser with their machines, while 24 percent of customers of the nation's 20 largest Internet service providers used Netscape's Navigator.

Fisher, only minutes before, had estimated Netscape was bundled with six percent of new computers sold. The 22 percent number, he said, evidently included a Compaq deal that was struck during the trial and gave consumers the choice to use Netscape's Navigator preinstalled.