Microsoft Net Reach Already Far Beyond Browsers

BOSTON (04/04/2000) - Even as Microsoft Corp. has fought a bitter court battle to defend itself against charges of using its PC operating system monopoly to quash competitors and make illegal inroads into the Internet browser market, the company has boosted its cyberspace presence. Microsoft's push into the Internet market has been so successful already that there are signs that the world's largest software company has become one of the globe's leading generators of Internet traffic.

"Microsoft has a huge presence on the Web, and what many don't realize is that it is global in nature -- at least one of their Web sites can be found at or very near the top in almost all major markets," said Brewster Kahle, president and chief executive officer of San Francisco-based Alexa Internet Corp., an Amazon.com Inc. subsidiary which offers Web navigation software and services that also allow the firm to track users' surfing habits.

Surprisingly, leading up to and even in the immediate aftermath of U.S.

District Court Judge Thomas Penfield Jackson's verdict yesterday, scant attention has been placed on the widespread empire Microsoft has built on the Internet, including everything from free e-mail services to a real estate and home mortgage business.

Instead, the antitrust case has focused attention on the Internet browser war Microsoft waged against Netscape Communications Corp. (now part of America Online Inc.) Microsoft pitted its Internet Explorer browser against Netscape's rival product Navigator.

Judge Jackson ruled yesterday that Microsoft violated two sections of the Sherman Antitrust Act and various U.S. state laws, behaving in a predatory manner to protect its operating systems monopoly while the company illegally strove to stop competition in the Internet browser market.

"The predatory course of conduct Microsoft has pursued since June of 1995 has revived the dangerous probability that Microsoft will attain monopoly power in a second market," Jackson wrote in his "conclusions of law," the legal term for the verdict, which he released yesterday. "Internet Explorer's share of browser usage has already risen above 50 percent, will exceed 60 percent by January 2001, and the trend continues unabated."

As the antitrust case heads into the remedy phase, with punishment yet to be meted out against Microsoft, an obvious question becomes, is it too late to stop the software juggernaut from making even more Internet inroads? Consider after all that any remedy imposed on the company is likely to be at least some months in the offing as the appeals process plays out. In the meantime, Microsoft could well grab more of the Internet market, both in terms of browser usage and traffic "Ultimately, if Microsoft manages to control 80 to 85 percent of the browser market, it will be able to make incompatible changes to both browsers and Web servers such that only Microsoft products can play in the market," David Niemi, president of Tux.org Inc., said today in an e-mail exchange. Niemi's group is a nonprofit organization that encourages open-source software use and development.

In fact, Jackson's ruling noted the incompatibilities Microsoft created and the instability that occurred for users of the vendor's Windows 98 operating system who tried to remove the Internet Explorer (IE) browser from their computers. A key part of the antitrust case is focused on Microsoft's "tying" of its browser to its OS.

"IE's browser share on Windows 98 and 2000 is over 90 percent because it is so hard to switch to anything else on those platforms," Niemi said. He added that the fault lies with the U.S. Department of Justice (DOJ), a plaintiff in the federal antitrust case against Microsoft, because the department failed to obtain an enforceable preliminary injunction to stop Windows 98 from entering the market.

Concerns over Microsoft browser dominance might actually extend beyond software.

Alexa's tracking shows that its users hit Microsoft's main Internet portal site, MSN.com, more than any other, and that the main corporate Web site, Microsoft.com, is third in the number of user hits behind Yahoo Inc.'s portal site. Microsoft's MSN (Microsoft Network) announced today that it is offering users six months of free Internet access, which would seem guaranteed to drive even more traffic to the software giant's various Internet sites.

Microsoft itself further gave the world a glimpse of just how fast its Internet presence has grown with figures the company released today. In only six months, MSN.com expanded its reach by 12 percent and now boasts 39 million unique visitors per month, Microsoft said today in a statement citing statistics from Internet measurement services provider Media Metrix Inc.

Furthermore, MSN Hotmail, Microsoft's free Web-based e-mail service, has at least 61 million active accounts, while the MSN Messenger Service has more than 10 million active users, Microsoft said. MSN offers Web services in no fewer than 17 languages through sites in 32 countries, the company added.

In February, Media Metrix ranked the combined Microsoft Internet properties as the third largest with 44 million unique visitors, behind only America Online Inc. (AOL) with a total of 57.6 million unique visitors to its multiple sites and services, and Yahoo with 45.8 million unique monthly visitors.

At that time, Media Metrix estimated the number of unique MSN.com visitors at 36.2 million, some 3 million fewer than today, but still significantly more than second-ranked AOL.com's 31.6 million visitors.

The trend shown in the Media Metrix statistics is corroborated by information compiled from tracking 500,000 Alexa users' surfing habits. MSN.com has become the leading Internet traffic generator worldwide, followed by Yahoo.com and Microsoft.com, Alexa President and CEO Kahle told IDG News Service last week.

What makes the Alexa information even more interesting is that its software is more tightly tied to Microsoft's Internet Explorer Web browser for PCs than to its main competitor -- Netscape's Navigator browser -- which Judge Jackson yesterday maintained was dashed by Microsoft's anticompetitive market behavior.

In other words, the surfing habits tracked by the Alexa software are skewed toward users who access the Internet via a PC using the Microsoft browser. Some 90 percent of the world's PCs use the Windows operating system, and many of those also now use Internet Explorer as the browser. Looking at the figures from Alexa and Media Metrix, Microsoft's motivation to tie those products -- beyond the great consumer benefits it touts as the reason -- become clearer.

Whatever the figures, though, not everyone agrees that it is too late to stop Microsoft from dominating the Internet. Its days as a leading Net traffic generator could well be fleeting and might have little to do, overtly at least, with Microsoft as a company. Most of MSN.com's customizable content comes from other sources, offering news, sports, weather, health and entertainment, and serves as a point for users to easily access those other sites.

"If MSN is leading at the moment, that probably means they have some pretty good content," said Carl Howe, research director of e-business infrastructure at Forrester Research Inc. in Cambridge, Massachusetts.

Howe advocates a break-up of Microsoft into smaller companies as the only workable remedy in the antitrust case. A behavioral remedy, which would order that Microsoft alter its business practices, would require "continuing oversight and be a huge expense," Howe said. That oversight would have to be undertaken by the federal government. In both his findings of fact issued in November of last year and yesterday's conclusions of law, Judge Jackson was highly critical of the software giant's business practices, not only in relation to its conduct towards Netscape.

Between now and when any remedy takes effect, Howe expects there will be close scrutiny of Microsoft's actions, so it's doubtful the company will be able to make any further attempts at grabbing market territory that aren't noticed.

Microsoft Chairman and Chief Software Architect Bill Gates and company President and CEO Steve Ballmer said in interviews yesterday after the conclusions of law were released that "they don't intend to change much in their behavior between now and any future settlement or judgment," Howe noted.

"That said, I do believe that they will certainly come under increased scrutiny and therefore I believe they will be at least somewhat inhibited. I don't think you will see them become more aggressive unless they want to pick a fight with the DOJ."

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