Originally created 02/12/99

AOL, Microsoft deal in focus



WASHINGTON -- A senior Microsoft Corp. executive testified that superior technology, not illegal business tactics, prompted America Online to abandon Netscape's Internet browser for the one made by Microsoft.

In written testimony released Wednesday, Microsoft Vice President Brad Chase challenged the claims of AOL executive David Colburn, who testified earlier in the computer software giant's antitrust trial.

Colburn had said Microsoft promised to put an AOL icon on the Windows desktop, the first screen a person sees after turning on a computer. Desktop placement -- and its potential to attract thousands of customers -- was the main reason AOL signed its 1996 contract with Microsoft, Colburn said.

Chase disagreed. He said a week after signing the deal, he spoke to Colburn about why AOL chose Microsoft over Netscape.

"While placement in the online services may also have been important, Mr. Colburn focused on different issues, making it clear that AOL would not have chosen Microsoft as its supplier of Web browsing software if we had not (had) superior technology," said Chase, who was expected to undergo cross-examination today.

In his direct testimony, Chase denied that Microsoft required AOL to prevent its subscribers from using Netscape software. Instead, he said, the company set limits on ways AOL could give it away.

"If 100 percent of AOL's subscribers converted to Netscape Navigator because that is what they decided to use, AOL would not be in breach of any term," Chase wrote.

The testimony appears to contradict admissions made in court Wednesday by Chase's colleague, Cameron Myrhvold, who heads Microsoft's Internet service unit.

Under cross-examination, Myrhvold said his company asked AOL and other Internet service providers to exclusively distribute Microsoft's browser "so we wouldn't lose those side-by-side choices."

The details were revealed as Myhrvold was questioned about an AOL contract that requires at least 85 percent of its customers to use Microsoft's Internet Explorer, or "IE" browser.

Government attorney David Boies introduced an e-mail sent to Myhrvold by another executive that showed the number of AOL customers who used IE jumping from 2 million to 12 1/2 million within a year when "AOL force fed the browser to America Online base."

Boies asked Myhrvold several times about Microsoft's motives behind its restrictive contracts.

"You were concerned if you presented users with a choice, side-by-side, they would pick the Netscape browser rather than yours?" he said.

"Yes, that's right," Myhrvold said. "We were nowhere. We were the Johnny-come-lately of the Internet."

At the time, Microsoft felt Netscape had "mind share," or name recognition.

"We would lose many of those decisions if we had to compete side-by-side," Myhrvold said.

Internet service providers often signed contracts requiring them to distribute Microsoft browsers in exchange for a place on the Windows desktop. The companies were allowed to ship different browsers but only if requested by a customer -- and only if the total number shipped was less than 25 percent.

In its antitrust lawsuit, the government claims Microsoft used its monopoly power and illegal tactics to crush and discourage competition.