Microsoft Declared That The Browser Battle Was Close to Over: And They Were Absolutely Right

377. In late 1995 and early 1996, Navigator seemed well on its way to becoming the standard software for browsing the Web. Within three years, however, Microsoft had successfully denied Navigator that status, and had thereby forestalled a serious potential threat to the applications barrier to entry.

     
     

     Indeed, Microsoft’s Kumar Mehta felt comfortable expressing to Brad Chase in February 1998 his “PERSONAL opinion” that “the browser battle is close to over.” Mehta continued: “We set out on this mission 2 years ago to not let netscape dictate standards and control the browser api’s [sic]. All evidence today says they don’t.”

378. The population of browser users is expanding so quickly that Navigator’s installed base has grown even as its usage share has fallen. In fact, AOL credited an estimate stating that Navigator’s installed base in the United States alone grew from fifteen million in 1996 to thirtythree million in December 1998.

     
     

     By all indications, Navigator’s installed base will continue to grow. This does not mean, however, that Navigator is — or will be — an attractive enough platform for the development of network-centric applications to weaken the applications barrier to entry. As discussed above, the APIs that Navigator exposes could only attract enough developer attention to threaten the applications barrier to entry if Navigator became — or appeared destined to become — the standard software used to browse the Web.

     
     

     Navigator’s installed base may continue to grow, but Internet Explorer’s installed base is now larger and growing faster. Consequently, the APIs that Navigator exposes will not attract enough developer attention to spawn a body of cross-platform, network-centric applications large enough to dismantle the applications barrier to entry.

379. Not only did Microsoft prevent Navigator from undermining the applications barrier to entry, it inflicted considerable harm on Netscape’s business in the process. By ensuring that the firms comprising the channels that lead most efficiently to browser usage distributed and promoted Internet Explorer to the virtual exclusion of Navigator, Microsoft relegated Netscape to more costly and less effective methods of distributing and promoting its browsing software.

     
     

     After Microsoft started licensing Internet Explorer at no charge, not only to OEMs and consumers, but also to IAPs, ISVs, ICPs, and even Apple, Netscape was forced to follow suit. Despite the fact that it did not charge for Internet Explorer, Microsoft could still defray the massive costs it was undertaking to maximize usage share with the vast profits earned licensing Windows.

     
     

     Because Netscape did not have that luxury, it could ill afford the dramatic drop in revenues from Navigator, much less to pay for the inefficient modes of distribution to which Microsoft had consigned it. The financial constraints also deterred Netscape from undertaking technical innovations that it might otherwise have implemented in Navigator.

     
     

     Microsoft was not altogether surprised, then, when it learned in November 1998 that Netscape had surrendered itself to acquisition by another company.

380. Were AOL ever to attempt to revive Navigator’s usage share with the intention of building it into a significant platform for the development of network-centric applications, that effort would not make any headway before January 1, 2001, when AOL’s obligation to distribute Internet Explorer on a preferential basis expires. In fact, there is presently no indication that AOL will try even after that date to raise Navigator’s usage share substantially.

     
     

     First of all, as explained above, AOL need not revive Navigator’s usage share in order to achieve an adequate return on its investment in Netscape. Secondly, while the due-diligence summary and board-ofdirectors presentation that preceded the Netscape acquisition discuss AOL’s commitment to invest marketing resources in an effort to stem the slide in Navigator’s share, neither report indicates any intention on AOL’s part to invest in actually raising Navigator’s share.

381. Also detracting from the notion that AOL is committed to reviving the middleware threat through Navigator is the fact that AOL included in the November 1998 agreement with Sun a provision making clear that the new partnership with Sun in no way obligated AOL to drop Internet Explorer from its client software in favor of Navigator.

     
     

     The provision states that “AOL has no present intention to make any such replacement or use and shall have no obligation to make any such replacement or use, and that it is AOL’s present expectation that it . . . may seek to renew and/or extend and expand its present agreement with Microsoft Corporation to continue to distribute Internet Explorer.”

382. Bill Gates himself, who is not one to underestimate threats to Microsoft’s business, apparently concluded after reviewing the November 1998 transactions that AOL would not seek to develop a platform that would compete with Microsoft’s network-centric interfaces.

     
     

     In December 1998, during a meeting convened to analyze the implications of the AOL/Netscape/Sun transactions, Gates declared to the assembled Microsoft executives, “AOL doesn’t have it in their genes to attack us in the platform space.”

383. Finally, if its coveted placement in the Online Services Folder fails to entice AOL into extending its agreement with Microsoft past January 2001, Microsoft assuredly has the wherewithal to offer AOL additional inducements in exchange for yet more commitments that will preclude a resurgence of Navigator’s usage share.

     
     

     Even if, despite the absence of signs to that effect, AOL drops Internet Explorer and adopts Navigator with a mind to reviving Navigator’s usage share after January 1, 2001, Navigator’s transformation into a platform attractive enough to threaten the applications barrier would be a chimerical aspiration, especially considering Microsoft’s increasing influence over network-centric standards. In any event, nothing that happens after January 1, 2001 will change the fact that Microsoft has succeeded in forestalling for several years Navigator’s evolution in that direction.

384. Although the suspicion lingers, the evidence is insufficient to find that Microsoft’s ambition is a future in which most or all of the content available on the Web would be accessible only through its own browsing software. The evidence does, however, reveal an intent to ensure that if and when full-featured, server-based applications begin appearing in large numbers on the Web, the number of them relying solely on middleware APIs (such as those exposed by Navigator) will be too few to attenuate the applications barrier to entry.

385. At least partly because of Navigator’s substantial usage share, most developers continue to insist that their Web content be more-or-less as attractive when accessed with Navigator as it is when accessed with Internet Explorer. Navigator will retain an appreciable usage share through the end of 2000.

     
     

     After that point, AOL may be able and willing to prevent Internet Explorer’s share from achieving such dominance that a critical mass of developers will cease to concern themselves with ensuring that their Web content at least be accessible through non-Microsoft browsing software.

     
     

     So, as matters stand at present, while Microsoft has succeeded in forestalling the development of enough full-featured, cross-platform, networkcentric applications to render the applications barrier penetrable, it is not likely to drive non- Microsoft PC Web browsing software from the marketplace altogether.

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This court case Civil Action No. 98-1232 (TPJ) retrieved on 2-13-2023, from justice.gov is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction.