The New York times

January 28, 1999

 

Microsoft Executive Defends Folding Browser Into Windows

By STEVE LOHR AND AMY HARMON

WASHINGTON -- A senior executive of Microsoft Corp. delivered a forceful defense of the company's actions in the Internet software market Wednesday, saying it had acted mainly in the pursuit of a "Holy Grail of software development" by making its products more powerful, easier to use and seamlessly integrated.

The executive, James Allchin, the second company official to appear as a witness at the Microsoft antitrust trial, also argued that other software makers have done what the government says is anticompetitive in Microsoft's case and presented a detailed history of his company's product plans for the Internet.

In his 139-page written testimony, Allchin repeatedly struck the theme that the Justice Department and the 19 states suing Microsoft are making an ill-advised effort to tamper with innovation and product design in a leading high-technology industry.

"I am not a lawyer or an economist," Allchin wrote, "but I do not understand how a company's efforts to improve its products can ever be 'anticompetitive."'

The testimony of Allchin, a senior vice president in charge of the technical development of the company's Windows operating system, is a salvo in Microsoft's legal fight with the government over how the lawsuit is framed, which is crucial to the outcome of the case.

Microsoft says its decision to bundle its Internet Explorer browser with its industry-standard Windows operating system and give the browser away free was a straightforward product-design decision that benefits consumers. But the government alleges that those moves represent the abuse of Microsoft's monopoly power to thwart competition.

Most antitrust experts say that Microsoft's strongest defense is to frame the case as a debate over its product decisions. Indeed, in a related case, a federal appeals court ruled last June that Microsoft has the right to bundle its browser with Windows, warning of "the undesirability of having courts oversee product design."

But the government views Microsoft's bundling decision as simply one step in a pattern of what it regards as predatory business practices intended to stifle competition. The prosecution case, according to antitrust experts, is strengthened by framing the courtroom debate around Microsoft's business practices and contracts.

At an antitrust trial, differing visions of what is good for the consumer.

At the trial on Wednesday, the government kept that focus in its third day of cross-examining Microsoft's first executive witness, Paul Maritz, trying to show that the company pressured the Intel Corp. to stop developing technology that conflicted with Microsoft's plans.

Intel is mainly a producer of the microprocessor chips that serve as the "electronic brain" of most PC's, but it also develops software. Microsoft's conflict with Intel in 1995 centered on Intel's work on multimedia software called native signal processing, or NSP.

Intel wanted to distribute its NSP software to PC makers, but it pulled back after protests from Microsoft. The government alleges that Microsoft muscled both Intel and the computer makers not to adopt any software that conflicted with Microsoft's plans. Microsoft replies that Intel stepped back on its own, after realizing that there were problems with its NSP software.

The Justice Department pointed to internal Microsoft e-mail to try to show that the big software maker did pressure Intel and the industry. An Oct. 18, 1995, e-mail to Maritz, written by William H. Gates, Microsoft chairman, said that Intel felt PC makers were resisting Intel's software because of "our NSP chill." Later, Gates added, "If Intel is not sticking totally to its part of the deal, let me know."

"Did you ask Mr. Gates, 'What bargain are you talking about? What deal are you talking about?'" David Boies, the Justice Department's lead trial lawyer, asked Maritz.

Maritz, the senior executive in charge of most software development and marketing at Microsoft, replied that he had not. But he maintained that Intel ultimately abandoned NSP because it was technically flawed and would not work with recent versions of Windows.

In what Boies portrayed as another example of Microsoft attempting to co-opt or pressure potential competitors, he also questioned Maritz about the company's investment in Real Networks Inc., a developer of software that allows audio and video to be transmitted over the Internet.

Maritz acknowledged that executives from Real Networks, then known as Progressive Networks, told Microsoft in 1997 that if Microsoft invested in the company, it would shift its business to other kinds of software and services to avoid competing. But Maritz noted that Real Networks continues to compete with Microsoft nonetheless.

A Real Networks spokesman said Tuesday that the company never agreed to get out of the streaming media business. Microsoft is in the process of selling its 10 percent stake in Real Networks.

In his lengthy written testimony, Allchin cited a series of Microsoft e-mail messages from late 1993 and early 1994 intended to show that the company was broadly planning to make access to the Internet an integral part of its Windows operating system even before Netscape had emerged as a genuine rival.

The concept of presenting users and software developers with a single computing vernacular, seamlessly integrating the browser with Windows, Microsoft insists, was its plan since 1994 -- though the vision was not fully realized until Windows 98, the most recent upgrade of its operating system.

The government replies that this is an exercise in revisionist history by Microsoft.

The Justice Department has already introduced other Microsoft e-mail dating as late as 1997 suggesting that company executives regarded the browser and Windows as separate products that were separately marketed and developed.