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Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator -- Ignore unavailable to you. Want to Upgrade?

To: Richard M. Smith who wrote (13541)	10/23/1997 1:06:00 AM
From: Harvey Allen	Read Replies (1) \| Respond to of 24154

The overall purpose of the Final Judgment was confirmed and amplified upon by the United States in its Memorandum of the United States In Support of Motion to Enter Final Judgment and In Opposition To the Positions of I.D.E. Corporation and Amici, filed January 18, 1995 prior to (and urging) entry of the Final Judgment. After describing Microsoft's operating system dominance, the brief continued: It is important to note, however, that an alternative to Microsoft's operating system might arise at some point, an operating system that either displaces Microsoft's or attracts sufficient users to gain the benefits of increasing returns to the point where the market is divided between the world of Microsoft and the world of this new operating system. The proposed Consent Decree insures that this new operating system, when developed, will have access to the market. * * * * * Page 30 We cannot say when, or indeed whether, such an operating system will succeed in displacing Microsoft, but the rewards for that success are so large that we expect to see continued attempts. We also can say that those who mount such attempts should not have to face the additional artificial barriers created by Microsoft's unlawful license provisions.

To: Richard M. Smith who wrote (13541)	10/23/1997 2:26:00 AM
From: Gerald R. Lampton	Read Replies (4) \| Respond to of 24154

Well, like a moth to a candle, I just could not resist going back and checking to see if the Consent Decree applies to Windows 95. And you know what? It does. Section II of the Consent Decree (the whole thing is at usdoj.gov ), titled "Definitions," states: " 'Covered Product(s)' means the binary code of . . . (v) the product currently code-named 'Chicago' . . . " However, the Decree expressly does not apply to NT Workstation or NT Server (Isn't this interesting? So, I guess they can bundle IE with NT to their heart's content. Query whether the planned unification of NT and Windows 95 will be a "successor product" to NT or to Windows 95.) It also is not clear to me that Internet Explorer is covered by the "Covered Product" language. However, it seems to me that IE could be characterized as an "unbundled product[] that perform[s] Operating System Software functions now embodied in the products listed in subsections (i) through (v)." After all, one of the "Operating System Software functions" Windows performs is to provide a graphical user interface, and another is to provide a set of application programming interfaces through which applications software can make calls to the underlying class libraries, whether they be part of the OS or part of some other software such as JFC. And we all know that IE performs both of these functions well. In its Petition, however ( usdoj.gov -- and hats off to Robert M. Smith for posting it here -- techstocks.com ), the Department of Justice takes the position that Internet Explorer is an "'other product' from Windows 95, and not part of an 'integrated product' within the meaning of the Final Judgment." Petition at 12; see also, Petition at 19 ("Microsoft's internal documents, public statements, and unambiguous actions in the marketplace demonstrate that Internet Explorer is a separate or "other" product from the Windows 95 operating system, and not "integrated" with it, for purposes of Section IV(E)(i) of the final Judgment"). It seems to me that there is a potential weakness here: unlike the term "Covered Product," the terms "other product" and "integrated product" are not defined in the Decree. Although there may be some extrinsic evidence that the court can rely on to fill in the missing gap, I would guess that Microsoft's definitions of these terms will diverge from the definitions adopted by the DOJ. Pointing this out seems to have been one of the purposes behind Chairman Bill's "some strange definition of integration" comments in the interview Derek Morgan posted here yesterday (the other being to frame the issue more favorably to Microsoft than would be the case if the debate were over the definition of a "product"). ( zdnet.com ) I'm not saying my approach is better. I would guess that the people who drafted the Consent Decree probably did not even know at that time what a browser was, let alone that Microsoft would be giving one away for free within a year. So it may be hard for them to argue that Internet Explorer was intended to be included in the "Covered Products" definition. But it's an argument, for what little it is worth. Query also what is going to happen when Windows 98 comes out, with its Internet Explorer Shell, or whatever they call it. Is that going to render this whole argument over "other products" vs. "integrated products" moot? I also question whether it is fair to say, as the Petition seems to, that Windows 95 holds a monopoly position in the market for operating systems. If you add in Windows 3.1, then, yes, Windows overall has 80-90 percent of the market. And Windows is shipping on 80-90 percent of new PC's. And, of course, at some point in the future, we all "know" that Windows 95's overall market share will come to approach its share of the new PC market. However, I would be curious to know if Windows 95 has yet achieved the critical mass, by itself, to constitute a "monopoly." It may not matter, since a violation of the Consent Decree (as oposed to a direct violation of the anti-monopolization provisions of the Sherman Act) does not appear to require proof of an actual monopoly. However, prevention of monopoly through illegal means is the purpose of the Consent Decree, and the government makes a big deal of it. Windows 95's alleged present monopoly over the OS market is a factual assertion I do not feel the Petition adequately proves. So, in the final analysis, we are left with the language of Section IV, subsection E of the Consent Decree: "Microsoft shall not enter into any License Agreement in which the terms of that agreement are expressly or impliedly conditioned upon: (i) the licensing of any other Covered Product, Operating System Software product or other product (provided, however, that this provision in and of itself shall not be construed to prohibit Microsoft from developing integrated products)" I'll go with my original thesis: if Internet Explorer is NOT a separate "product" from Windows, then Microsoft wins. If it is, then Microsoft is hosed.