DoJ casts doubt on Win98

Washington, D.C. - The U.S. Department of Justice last week charged that Microsoft Corp.'s bundling of Windows 95 and Internet Explorer constituted an illegal "tying" of products.

Far less clear, however, is the government's position on Microsoft's upcoming Windows 98 and NT 5.0 products, both of which fully combine the browser and operating system. No one seems to know if the Justice Department will allow these offerings to ship as planned next year.

The Justice Department claims that Microsoft forces PC makers to feature Internet Explorer prominently if they want to package Windows with their computers. Microsoft does not deny the practice, but says it is in keeping with a consent decree the company signed with the Justice Department in 1995.

Microsoft says there is no doubt that Internet Explorer is part and parcel of Windows 95, but the Justice Department's antitrust division says, "No way."

A U.S. District Court judge will decide who is right in the coming months.

All eyes will be on the court to also see if it will place any limitation on the extensive browser/operating system integration Microsoft has planned for Windows 98 and NT 5.0. Already in beta, the products use the Web browser as the primary interface for surfing all local, network and Web data.

Observers note that Microsoft is not the only company looking to shift to an integrated desktop and Web interface - rivals Netscape Communications Corp. and Sun Microsystems, Inc. have outlined similar plans.

"It's a critical moment for the (Department of Justice) to look at whether this trend will be controlled by Microsoft based on its historical control of the (operating system)," said Yochai Benkler, a professor at the New York University School of Law.

Benkler declined to speculate on whether the court might stop Microsoft from completing this full integration. "The edges of the operating system in this case are just too fluid to make that type of prediction," Benkler said.

Microsoft rival Sun was not so tentative as to offer its interpretation.

"The court could very well force Microsoft to pull the browser out of Win98," said Micheal Morris, general counsel for Sun. "We may be in a situation where once the product has been established as a separate entity, you can't make it unseparate just by sucking it into the (operating system). It may be too late for that."

Microsoft opponents said they welcomed any court decision that would curtail Microsoft's market dominance. "The meaning of an OS cannot become dependent on however Microsoft defines it, because then they can define it to the endless disadvantage to competitors and then consumers," said Gary Reback, a Silicon Valley attorney well known for challenging Microsoft's competitive practices.

Alarms sound

Corporate users testing both Windows 98 and NT 5.0 were alarmed that existing upgrade schedules could be adversely affected by a court decision.

Nationsbanc-CRT of Chicago has standardized on Windows NT 4.0 across its 1,000 workstations and is planning an upgrade to NT 5.0 next year. "I like the idea of using a browser to get at any resources I need - local or Web. I still want to have that opportunity," said Rick Shope, manager of PC technology with the trading arm of Nationsbanc Corp.

Scott Winkler, vice president of operating system research at Gartner Group, Inc. in Stamford, Conn., doubted Microsoft will be forced to pull the integrated browser functionality out of either Windows 98 or NT 5.0. But the company will have to make significant changes to how it markets its browser.

"They won't sell the product separately. They won't package it separately. It will no longer have its own home page," Winkler said.

William Neukom, Microsoft's senior vice president of law and corporate affairs, said he expects the ruling to have no bearing on either the delivery of Windows 98 or NT 5.0 or how the company markets the products.

Compaq coerced

In recent subpoenaed testimony, Microsoft's largest OEM, Compaq Computer Corp., supported the Justice Department's contention about Microsoft's tactics. Compaq officials said they received a letter from Microsoft stating that if they chose to ship PCs with Netscape's Navigator instead of Internet Explorer, Microsoft would terminate Compaq's license to ship Windows 95.

The Justice Department has asked the court to levy a $1 million per day fine until Microsoft stops forcing OEMs to carry its Web browser.