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Mr. Gates goes to D.C.
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March 2, 1998: 6:08 p.m. ET
Microsoft chairman heads to Senate to testify as part of computer panel
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NEW YORK (CNNfn) - Microsoft Corp. Monday said it is revising deals with about 40 Internet service providers to allow then to promote browser software made by Microsoft competitors.
Company officials said the change, which comes one day before Microsoft Chairman Bill Gates is scheduled to appear before a Senate committee looking into competition into the personal computer industry, has nothing to do with the government's antitrust probe of the software giant.
"We made a change in some of the requirements of our ISP agreements based on a business review," Gates told reporters in Washington. "There have been some informal questions from the European Commission," said Gates.
Microsoft formally notified the European Commission of the change in its contracts on Feb. 27, according to Microsoft spokesman Mark Murray. It already had given informal notice of its intentions last fall.
"In the course of making this review we decided it didn't make any sense to make changes in our policy in Europe and not in the United States," Murray said.
"We decided to have a consistent policy with our Internet providers across the board worldwide."
However, critics found the timing of the company's decision odd.
"Seems strange to me they'd do it the day before the Judiciary hearings here in Washington," Netscape Communications Corp. President and Chief Executive Jim Barksdale told CNNfn.
Netscape and Microsoft have been locked in a bitter battle to control the software that allows computer users to navigate the Internet. Netscape, which once had a commanding share of the browser market, has watched Microsoft steadily chip away.
Senate panel to question Gates
The committee meeting was called by Judicial Committee Chairman Orrin Hatch, (R-Utah) a vocal critic of Microsoft in the past.
The panel will look at the role of monopolies and competition in the PC industry. Besides Gates, other industry CEOs called to testify include Jim Barksdale of Netscape (NSCP), Scott McNealy of Sun Microsystems (SUNW), Michael Dell of Dell Computer Corp. (DELL), and Doug Burgum of Great Plains Software Inc. (GPSI).
Hatch told reporters he expects the hearing to be fair to both sides.
"There will be Microsoft critics at this hearing -- representatives of Netscape and Sun Microsystems will be there -- and they'll represent quite a number of companies throughout the country who are claiming that Microsoft is violating some of the antitrust laws, so we will hear from them and will also give Mr. Gates plenty of opportunity to tell his side of it."
Previously, Microsoft (MSFT) had business agreements with 12 ISPs in the United States and 30 in Europe that didn't allow the ISPs to promote any other browsers except Microsoft's own Internet Explorer.
In exchange, the providers were given a listing on Microsoft's Windows 95 operating system menu, which makes the ISPs prominent to new consumers.
Microsoft has come under fire from regulators, including the U.S. Justice Department, over the standard placement of Internet Explorer in Windows 95. The operating system is installed in more than 90 percent of all new personal computers, and officials have been concerned that Microsoft is using that strong position to muscle out competitors' browsers, including Netscape Navigator, made by Netscape Communications Corp. (NSCP).
On Monday officials from 27 states filed a brief in support of the Justice Department's investigation.
Microsoft has responded to the criticism by saying that Internet Explorer is an integral part of Windows 95. It also has bristled at what it claims is unnecessary government meddling in the software industry.
The decision to allow promotion of other browsers was surprising, since it appeared to be a preemptive attempt by Microsoft to ease concerns that could arise as part of the Justice Department's ongoing investigation. In the past, Microsoft has stubbornly fought investigators.
"[Attorney General] Janet Reno and [Assistant Attorney General] Joel Klein have certainly gotten Bill Gates' attention," said Internet analyst Don Depalma of Forrester Research.
ISPs provide an important gateway for browser companies to computer users, which is why Microsoft and Netscape have sought to lock up deals with ISPs to provide their respective browsers exclusively.
And while Windows 95 and software provided by most Internet service providers allow for consumers to choose other browsers, apathy is strong and many computer users stick with whatever comes with their ISP.
Panel to look at PC competition
The Senate probe is tracking an inquiry by the Justice Department into whether Microsoft violated a 1995 consent decree that attempted to increase competition in the software industry.
In February, the Justice Department sent subpoenas to some of the nation's largest Internet service providers, including America Online (AOL), to determine what types of arrangements the ISPs made with Microsoft.
Barksdale said he hopes the moves will result in a broader investigation of the software giant.
"We all understand that Microsoft's a national treasure and we don't want to do anything that stifles innovation by them, and we don't believe that enforcing the law has ever stifled innovation, there are too many cases where it proves just the opposite," he said. "So I don't want to be labeled as whining, I don't want to be labeled as stifling innovation and I don't want to be labeled as somebody who's going against Microsoft. We just want a more competitive software industry and we think if they would stop some of these practices we could all reap the benefits including Microsoft."
Both Barksdale and McNealy have been outspoken opponents of many of Microsoft's business practices and last year Sun filed suit against Microsoft alleging that Microsoft is trying to disrupt the development of Java by failing to keep its implementations of Java compatible with Sun's specifications.
-- from staff and wire reports
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