By Jo Maitland in Washington
Microsoft Corp called its final rebuttal witness – economist Richard Schmalensee, dean of MIT’s Sloan School of Management – to the stand Monday. Schmalensee said the explosion in users on the internet over the past four years was down to better and cheaper web browsing software and that Microsoft played a large part in that growth. He said that Microsoft and Netscape (now part of America Online) continue to pour millions into improving their browsers, demonstrating the browser war is not over. One way to see if a war is over is if both sides have stopped shooting; both sides in this war are still firing, Schmalensee said, contradicting the testimony of the government’s expert witness, fellow MIT economist Franklin Fisher. Fisher said the browser war was over in 1995.
Most of the morning went on with Schmalensee, who first took the stand in January, saying that consumers are now much better off than they were in 1995, when the only available browser was Netscape Navigator. Then, Navigator held about 80% of the market until Microsoft’s $100m investment in Internet Explorer resulted in it surpassing Netscape in 1998. By 1999, browsers were free, could be componentized, and were a platform for applications, he said. If Microsoft had not developed IE, there would have been a lot less choice, he added.
Microsoft attorney Michael Lacovara then focused on the AOL- Netscape deal last year, which he said proved that Netscape’s browser was not a dead business. He added, It has become a much more serious threat in the last six months and it is also impossible to avoid the conclusion that Linux and Java have also become more serious as well. AOL’s agreement to produce new software technology with Sun Microsystems Inc increases the chances that Navigator and Sun’s Java programming language will be software platform challenges to Windows, which powers 90% of the world’s PCs, he said. Both have been enhanced by that merger, he said. Software developers are now writing applications that allow users to store data on the internet. These internet software applications will enable AOL, Java and other platforms to challenge Windows, he said. US District Judge Thomas Penfield Jackson appeared to deflate the argument, however, in his only address to the court yesterday morning when he said to Schmalensee, If you’ve got Explorer and nothing else, you use Explorer.
Outside the court, David Boies, the government’s lead attorney, admitted the shooting war on browsers between AOL-Netscape and Microsoft is clearly going on but he questioned to what extent that is going to affect Microsoft’s PC operating system monopoly. He said: The browser does not form an alternative technology to the operating system – and with Microsoft’s dominance, it doesn’t matter how many alternative technolgies are out there. Boies commented on Schmalensee’s barrage of information on Microsoft’s investment in its platform while still not charging any more for it, to refute the government’s claims of predatory pricing. Boies said: This witness came very close to saying today that Microsoft can get its money back [refering to the $100m investment poured into Internet Explorer] through selling Windows. But nowhere does it say they will make their money back through browsers or portal advertsing, not a hint of that. Microsoft is using its monopoly in the operating system market to push into other areas – the crux of our case, he concluded.
