Gates: Satisfied with Senate Hearing, but Changes 'Net Contracts

Fresh from the Senate hearing on computer industry competition, Microsoft Corp. chairman and CEO Bill Gates has said he was pleased with how it went, but also said the software giant is changing controversial ISP and Internet content provider contracts.

Fresh from the Senate hearing on computer industry competition, Microsoft Corp. chairman and CEO Bill Gates has said he was pleased with how it went, but also said the software giant is changing controversial ISP and Internet content provider contracts.

A relaxed and feisty Gates made the remarks during a public interview with television talk show host Charlie Rose and a subsequent press conference at the New York Public Library. The nominal reason for the staging of the event was a gift of US$640,000 that the Gates Library Foundation made to the library.

But the event turned into a wide ranging discussion of how Microsoft is dealing with growing concern about its increasing power in the computer industry.

Microsoft has decided to change provisions in contracts it has with Internet Service Providers who get customers that are referred to them through an Internet sign-up dialog box in the Windows operating system, Gates said.

The contract has been a focus of controversy that Gates called “a side show.”

“We said [to] those companies [ISPs] that when we refer the customer that we don't want them to say ‘Hey, you should use Netscape instead of Internet Explorer .. we'd like them to say, ‘Here's Internet Explorer,' " Gates said.

The number of people signing up for ISP service in this manner is 3 percent of the total number, Gates said. “Why is that a big deal?”

Gates pointed out that Netscape has a similar arrangement with ISPs.

“But we said this is a side show, we are dropping the restriction ... so now when we refer somebody over they [ISPs] can say, ‘Yeah, beside the fact Microsoft referred you we'd like you to use Netscape.”

Microsoft is also changing provisions for content providers listed on its Windows Channel Guide to the Internet. Up to now, the 15 content providers listed on the guide were restricted from also to be a part of Netscape's equivalent service, Gates said. But Microsoft is dropping that provision also.

Gates belittled the Channel Guide controversy, but said it showed that Microsoft has a strong hand in ongoing antitrust investigations and concerns by the government and competitors.

“.001 percent of [Internet] navigations are taking place through that Channel Guide.... the good news of all that is if that is all [the government and competitors] can start talking about, then we're golden.”

Prompted by a question from Rose, Gates denied feeling that he is under siege. But he did say that a lot of government officials are jumping on the bandwagon.

“There is a phenomenon that when the Department of Justice sues a company a lot of people think, “Hey, can we pile on, is this like a wounded animal in the middle of a field or not?”

But the bottom line for Microsoft is that there the only issue of significance is whether it is allowed to add functionality to Windows.

“Are we allowed to innovate by adding new functionality to Windows? ... The laws in this country, every case in this country supports that."

With that in mind, Gates said, the most significant result from yesterday's Senate hearing was that no one proposed that new laws are necessary to regulate the computer industry. “Even the competitors, you have to give them credit – even though they were whining quite a bit --- said the current laws ... are fine.”

At least one analyst here today agreed with Gates, with one caveat.

"That's a very significant point, though Gary Reback, who is a lawyer for Netscape, has suggested new laws," said Rick Sherlund, an analyst with Goldman Sachs & Co. in New York.

Two of Microsoft's biggest critics and competitors, Sun Microsystems Inc.'s Chairman and CEO Scott McNealy and Netscape Communications Corp.'s CEO Jim Barksdale, among others, spoke at yesterday's Senate hearing, "Market Power and Structural Change in the Software Industry.''

The hearing was put together to give Senate Judiciary Committee members a chance to learn about software industry competition directly from industry leaders and analysts.

Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or http://www.microsoft.com/.

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