January 31, 1999 - Sunday
1:30 PM PST - 98Lite update.
Yes. After removing IE from Windows 98 using 98Lite, even Office 97 installs without a hitch. Even the little paper clip guy shows up as expected. But, I am sure James Allchin will testify in court that if you remove IE from Windows 98, the OS is busted.
I have not tried Navigator because the test system is not used for internet access. Which brings up another reason why not a single consumer should be forced to buy, install, maintain, use or pre-load IE just because Microsoft wants to sell something.
If Microsoft wants to try to sell something they can do so in accordance with the law.
January 30, 1999 - Saturday
7:30 PM PST - When did IE stop being an application? Not before 1996 is the short answer.
Transcript Jan 28 PM: Mr. Boies is asking the questions. Mr. Maritz providing the answers. Blue italics are my comments
q. Now, when he goes on to say about the web
browser that putting the web browser is possible, but it's large and it's
not useful unless you're already on line and you're already struggling
to fit on 12 disks, do you understand that mr. Slivka is saying that
he thinks there may be some reasons not to put the web browser in?
a. Yes. And this refers again to the
retail client. clearly the 12 disks doesn't make any sense in the
oem case because it comes pre installed on the hard disk. so, what he's
pointing out here is the initial versions didn't have support for connecting
to other network except the microsoft network, so he's trying to say it's
limited usefulness unless you really got a connection. and he's saying
there are some disadvantages in the retail product case because of its
size.
Lots of reasons for not putting the browser in the box.
q. And this was as of april of 1995; correct,
sir?
a. Correct.
q. And at about the same time, you were taking
the position that it would be helpful to bundle the browser with windows,
and not just in frosting, in order to increase the distribution of ie and
to insure that you don't let any other web client or browser get to high
volume?
a. I was certainly taking the position that
i wanted to get ie into windows 95, so the answer is yes. And the
reason for doing that was to get our technologies used by as large a number
of users as we could. And necessity, as we had the whole discussion
earlier this week, that means less opportunity for others in that sense.
Get IE into Windows 95 or force all consumers to buy IE? I see no issue of integration for extra benefits. I only see reasons for greater distribution (a theme Mr. Maritz stuck too in his dialog with the Judge two days before.)
q. Well, let me say that i don't want to necessarily
repeat everything, but you did look at government exhibit 498 during the
break, did you not, sir?
a. I had a chance to scan through it.
I didn't have a chance to read everything in it, but i did look through
it, yes.
q. And this was something that you wrote as
of april 6th, 1995; correct?
a. Correct.
q. And as of that time, the current plan was
to put o'hare into frosting; correct?
a. Correct.
So, as of April 95, IE was an optional product even for Windows 95.
q. And one of the things that you were saying
is that you thought the most important thing that you could do was, quote,
not lose control of the web client; correct?
a. That's correct.
Heaven forbid that some other company might sell their products, pay salaries and further develop competing technologies.
q. And you believe that by controlling the
client, you would also control the servers; correct?
a. Correct.
One market leads to another.
q. And you believed that you did not want
to allow any one web client to get the high volume?
a. Correct. I believe that that's consistent
with what i said.
q. And that you believed that you could further
your objectives by bundling internet explorer with windows.
a. Yes. I believed that it was very
important that windows should offer this functionality that was going to
be destined to become some of the most important ways of accessing information
and hosting applications in the future. I thought it was perfectly
obvious that we would want to try to do everything we could to include
this functionality in windows.
Everything to sell IE including bundling
it so consumers could not refuse the product. Hey, bundling a losing
product with a monopoly is a sure fire way of forcing the sale to everyone.
q. And you felt that even though you recognized
that the browser, at that point, was a stand-alone web browser and not
an integrated one; correct?
a. At that point in time, it was not destined
to be included in windows 95. as i said, integration was something
that was our objective, and we continued to execute along that path. rome
wasn't built in a day.
And, Rome was not built as a single building either.
q. Well, sir, as late as december of 1995
and as late as internet explorer 3.0, microsoft still internally recognized
that that browser was a stand-alone browser that ran on windows 95 rather
than being integrated into windows 95; correct?
a. Well, there were elements of integration
in that time frame. In particular, we had put hooks into windows
95 to support that url.dll software that we mentioned earlier. so,
we clearly anticipated that where we were going to go was to do deep integration
down the line, but the whole tenure here is that we had trouble getting
it all done in time.
q. Let me see if i could try to clarify this.
first, you had previously taken the position that internet explorer 1.0
that shipped in 1995 with windows to oem's was integrated--correct, sir?--as
you used those terms.
a. There are two levels--two ways that one
could talk about integration. One is in terms of technical relationships
between the code, and there were certainly technical relationships; and
secondly, as actually packaging them together for purposes of developers.
so that sense, we believe that internet explorer 1.0 was integrated into
windows 95, the oem version.
Here Maritz talks about integration as being a benefit to developers. That is true. But, why force consumers to buy IE and use that money to subsidize developers? We all know the answer. 1) block out netscape 2) increase barriers to entry for competitors. Did not Mr. Fisher say that?
q. Now, despite the fact--and that was 1.0;
right?
a. Correct.
q. Now, despite the fact that you considered
1.0 to be integrated, you nevertheless considered it to be a stand-alone
browser application that ran on top of windows 95; correct?
a. I don't know if i characterize it that
way. There is (sic) lots of software that we considered to be integrated
with windows but which we distributed independently of windows. So,
the original versions of directx, for instance, came out and were distributed
independently of windows. So, i don't think that, in and of itself,
is a test of integration or not.
An integrated but separate application? Sort of like Word and Excell?
q. I wasn't suggesting that by itself it was
a test of integration. I was really asking you, you have described
ie 1.0 as being integrated into windows 95.
now, without quarreling with your use of the word "integration"
right now, i'm simply asking you whether you agree that ie 1.0 was an application,
a stand-alone browser, that ran on top of windows 95?
a. I believe it is--in terms of the retail
package, it was a separate body of code that you could install for use
with windows 95, but i'm not sure if i would say it's a stand-alone application,
per se. I'm not sure what context those words were used, so you need
to help me there.
We need a new term here to describe these "separate bodies of code that you can install for use".
q. Okay. Let me jump ahead to 3.0 and
give you some context, and that is government exhibit 37, which again was
a document that i gave you during the break. Do you have that?
a. I do.
q. Now, there is a reference here to nashville.
What is nashville?
a. Nashville was intended to be the follow-on
release of the windows 98 technologies--sorry, windows 95 technologies.
That project later, or elements of that project were abandoned. Other
elements were picked up in what became windows 98, which is code named
"memphis."
q. Okay. Now, if you look at the third
and fourth sentences in the bottom paragraph, it says that microsoft was
planning, and it says, "we were planning to make ie 3.0 available for free,"
and were is italicized there for reasons, i think, the context of the document
may make clear. it then goes on to describe ie 3.0 as a stand-alone web
browser that runs on windows 95. do you see that?
a. I see that.
q. And this was a memorandum dated december
14, 1995, from mr. Silverberg, who was responsible for windows 95 and the
web browser, to you and to mr. Gates; correct?
a. Correct.
So as of December 14th 1995 IE 3.0 is clearly described as a stand alone web browser. As you recall a week or so ago, I referenced word changes on a Microsoft web page dated after this suit was filed that substituted "browser" for "internet technologies". And 98Lite, yet to make an appearance in this trial, removes IE from Windows 98 simply by replacing a few files and deleting others. And, of course, next week we get to review that e-mail and spreadsheet listing even more files that can be deleted.
The code blending job ordered up by someone at Microsoft just has not yet been done, has it? I guess Rome was not built in a day.
January 29, 1999 - Friday
2:45 PM PST - If James Allchin is correct, I must be imagining things.
Found this reference in an article in the San Jose Mercury News
The trial
resumes Monday, when Microsoft senior vice president James Allchin is
scheduled
to testify. In written testimony released Wednesday, Allchin argued that
Felten's
attempts to remove Internet Explorer from Windows 98 failed.
Internet
Explorer, he testified, "is so central to the operations of Windows 98
that the
operating
system would fail to function if it were removed.''
Well. As I have conducted an experiment on my own system just last night using 98Lite to remove IE from Windows 98, I have to respectfully suggest that James Allchin is about to submit false testimony in a court of law. Now. Maybe Windows 98 with IE removed is failing in some way not yet apparent, but the only problem I have experience lately is getting Windows98 to correctly use my video cards and monitor. Right now, only Microsoft stuff is failing to function on my test system. The removal of IE went along quite smoothly and has offered significant benefits. I have loaded the entire WordPerfect Pro Suite 8.0 and Delphi 3.0 with no problems at all. (I swear the OS helped do that.)
Windows 98 is smaller and takes up less memory when running too. That is a double benefit.
By the way Jim, how many applications do
you always load at boot up? Do you load at boot up any applications
you never use? Do you load at boot up any applications unsupported
by your staff? I really want you to testify as to how I am benefited
by being required to pre-load applications selected by Microsoft, applications
I never use and applications not supported locally. Somehow your
direct testimony suggests I get a benefit from that. For the life
of me, I can not understand your thinking.
12:09 AM PST - Yes, 98Lite does seem to remove IE from Windows98
I have used the Os/2 boot manager to set up two partitions in which I could install Windows98. I then used the IE-Remove utility to remove IE from one of those two setups. The disc storage requirement when down from 157 Mbs to 133 Mbs (I'll check later but this include disc space for virtual memory). The allocated memory used by the OS upon booting up (no applications) when down from 39 MBs to only 24 MBs. (I only have 32 MBs Ram on that system).
So. Yes, Virginia, IE can not only be easily removed from Windows 98 but it can be done by a non-Microsoft person.
Now, certainly, James Allchin and his boys can do better than that, right?
I have not tried running applications yet. But, I do not expect any problems. Do you think that the Microsoft help line would assist if I incur any problems running WordPerfect 8.0?
I did have some problems however. For some reason Windows 98 did not like either of two video cards I tried using. Windows 98 boots but I have to override the desire by Windows 98 to change my video drivers during each boot up. This problem occurs with both versions, Windows98 with IE and Windows98 without IE.
If you happen to know James Allchin, be sure to let him know of this install so that he will be properly prepared for his testimony next week.
January 28, 1999 - Thursday
7:00 PM PST - Blue Mountain gets injunction against Microsoft
4:15 PM PST - 98Lite seems to disprove just about everything Microsoft has been saying
The 98Lite web site provides free downloads with instructions on how to remove IE from Windows 98.
I, for one, will try to install 98Lite as per the instructions.
If Windows 98 without IE is as the web site suggests, Microsoft can not point to a single advantage to consumers regarding being forced to buy IE. The review seems to suggest that Windows 98 is much smaller and faster without the extra baggage that comes with IE. Anyone who has set up their system by pre loading all of their favor applications fully understands the fallacy in "always pre loading the whole boat".
2:05 PM PST - Fabricated defenses just do not hold up
Some attorneys assume that the truth will eventually show up and adjust their strategy accordingly. Others assume that they can hide the truth and fool the court.
Guess which camp the Microsoft attorneys appear to come from?
1:38 PM PST - So much for the "it is too hard for our engineers" defense.
As I recall even Bill Gates claimed that IE could not be removed from the OS. "Gosh, really?", is the correct reply to that statement. Seems that Felten came up with one way and the 98Lite (below) came up with another. And, all of this hardly breaking a sweat.
(By the way, I am still waiting for the transcripts from yesterday to be published. Has Microsoft given up?)
1:08 PM PST - 98Lite proves Microsoft's defense is bogus
Of course it is bogus. There are no technical nor practical reasons for forcing all consumers to buy IE. None. It is simple bundling or tieing by a monopolist hell bent upon precluding competition. Even testimony from Maritz helps prove that.
12:16 PM PST - The testimony from James Allchin apparently fails to suggest a single benefit for the majority of Microsoft customers that can be derived from being required to buy both the Os and browser from Microsoft.
James Allchin can advertise the Microsoft products all he would like. And, certainly suggesting that consumers should buy both their Os and internet browser from the same company is attractive. However, he fails to explain how the majority of Microsoft consumers benefit from being forced to do that.
1. A high percentage of Microsoft customers do not connect their computers to the internet.
James Allchin fails to suggest how those customers benefit from being forced to buy an application they do not even want. James Allchin fails to suggest how those customers benefit from being forced to buy an application they do not need. Many customers have multiple computers and only one of them would ever connect to the internet. Maybe James Allchin can explain how if I have 3 computers I should be forced to buy 3 copies of the word processor I use on one of them. Does Mr. Allchin put premium fuel in all his cars just because one of them needs it? Premium fuel is better, right?
2. Of those Microsoft customers that do access the internet, about half (depending upon whose numbers you use) prefer to use the Netscape browser (or some other browser of their choice).
James Allchin fails to suggest how those customers benefit from being forced to buy IE and switch the browser application they use.
3. Those Microsoft customers who already bought and/or use IE as their only browser may continue to benefit from IE but are precluded from benefiting from any technology that might be developed in the future by someone else. Even they are precluded from using the current application (version of IE) they are familiar with.
James Allchin fails to suggest how Microsoft's own IE users would benefit from the lack of a competitive choice in the marketplace and benefit from the lack of any competition in the future regarding internet technologies.
Is James Allchin really this ignorant of the benefits to be achieved by technologies that might be developed by someone other than a Microsoft employee? Or, a company that Microsoft can buy? Or, an idea that Microsoft can steal? Clearly not. Mr. Allchin knows the benefit of these future technologies and is only testifying to seal off possible competition from companies that may offer them.
I challenge Microsoft to show any benefits to consumers by forcing them to buy IE. Not the benefit of the product, mind you. That benefit they can get by choosing to purchase it in the marketplace. But, rather the benefit of being denied that choice to purchase or pick another product. Or, the benefit by denying them the right to use their current version of that application.
Does Mr. Allchin really think that all Microsoft Word customers should be forced to upgrade simply because the latest version is a little better? No benefit of the later version justifies a forced sale to any customer.
Taxpayers are not benefited by being able to pay taxes. Microsoft customers are not benefited by being forced to buy Microsoft products. If all Microsoft products were perfect, forcing all consumers to buy them is not a benefit.
James Allchin's testimony is simply the "shut up and get out your credit card" defense. No customer is benefited by being forced to buy IE. Not even the most vocal of all Microsoft supporters will let someone else pick their applications for them based upon that other persons conclusions on how they would benefit.
It is called "consumers choice" and it never ever exists if the consumer can not say "NO".
And, as testimony in this case has already pointed out, Microsoft not only forces the purchase of IE by all consumers, but Microsoft also forces the use of IE. Does the judge have to order that Microsoft switch to Linux before James Allchin understands this issue? Linux is better, right? Os/2 is better, right? Maybe is Microsoft corporation were forced to switch to one of those choices, James Allchin would understand. His entire testimony could support the Judges order to that affect. The court could list all of the benefits and have it so ordered.
The issue here is not one of benefit. The issue is letting the
individual customer measure the benefits and choose the best solution themselves.
This case is not about whether IE and the OS offer enough benefits to justify
the forced sale to all consumers. Reading the testimony from James
Allchin, you would think that he thinks it is. "Look" he says.
When customers are forced to buy from Microsoft, "they benefit".
11:50 AM PST - The all important browser split?
The ability to split the browser from the OS is important but not as this issue is commonly discussed.
Microsoft seems to suggest that if IE and the OS can not be split using a file manager or uninstall utility, then those two products are legally one product. This is false. Whether IE and the OS are one or two products depends upon how the companies in the industry and the customers in the industry view the issue. This is not a case where an act solely within the discretion of the defendant decides the legal issue. The question is not whether the current version of Windows 98 as shipped can be split into the two original products, but rather whether those two products "could" be split and sold separately and still offer the same benefits to the consumer. This is clearly the case.
Microsoft itself has always and continues to deal with these two products as two products. Even the testimony from Mr. Maritz goes to prove that. The discussion about putting IE into the "icing" proves that. The discussion about IE being available on other platforms proves that. The discussion that IE 4 as an identified and trademarked product proves that. Microsoft buying the Internet Explorer trademark only last year proves that.
Microsoft's only argument here is that if a bundled product can not be unbundled by standard file utilities, then only one product exists. This is false reasoning. Software is a truly malleable product just as Mr. Felten testified. Any two software products developed by Microsoft can easily be bundled in the same fashion as the OS and IE have been bundled regardless of the logic in doing so.
If all consumers want to be forced to buy the Office 2000 Pro suite with their next computer, they can hope Microsoft wins on this argument. Otherwise, you better be real careful about what you wish for.
It is not software engineering for the court to recognize the demand for browser products separate and apart from the OS. Microsoft itself even does so when it distributes IE for Solaris, etc. The entire integration argument is a fabrication which would not even exist save for the need of Microsoft to have an antitrust defense.
11:30 AM PST - While we wait for the transcripts from yesterday...
The direct testimony of James Allchin has been published by Microsoft. It is available in both summary and detailed form. I'll be taking a look at this direct testimony.
11:08 AM PST - What happened to the transcripts from Jan 27?
I was looking for the transcripts from yesterday's examination of Paul Maritz normally published by Microsoft the day following the testimony. This morning when I checked to review that testimony, I found to my amazement that yesterday's transcripts were not posted.
You do not suppose that Microsoft got wind of my "Wrap and Flow" column and decided to deprive me and the press of the daily transcripts? Nah. They would not do that. Paul Maritz did not make that big a fool of himself. Maybe they will publish them later.
January 27, 1999 - Wednesday
6:30 PM PST - We all know the goals Microsoft has but the means they employ to achieve those goals are what are on trial.
Transcript Jan 26 PM:
q. Okay. So, what you were trying to do in these meetings is persuade Netscape to use the Microsoft platform; correct?
a. Correct.
q. Okay. And you understood that at the time?
a. Yes, and in the same sense that I said several times earlier today that in the same sense as we try and persuade them, anyone in the world to use our platform technologies.
The question is "what happens to companies
that do not do as Microsoft says they should?".
4:40 PM PST - Just what was that last minute suggestion regarding IE 4? The judge wants to know.
Transcript Jan 26 PM:
The following Q&A is very interesting. Keep in mind that lawyers are often wrong when they try to guess what a judge is thinking based upon questions asked etc. during trial. However, indulge me for a few minutes and allow me to insert comments following the Q&A exchange.
The court: What exactly was it that they were proposing
would be done?
The witness: Your honor, what they were proposing
was to take some features out of Internet Explorer 4.0 and charge for them
separately.
Charge for separate products? Novel idea?
The court: Charge for it, all right, charge for
it separately.
The witness: Those features would be entirely present
in Windows 98, because you understand that Internet Explorer 4.0 was given
away as a free upgrade to Windows 95 users.
The court: I understand that. You were suggesting
take some of these features out.
The witness: And charge for them separately.
The court: And charge for them separately.
The witness: In order so that when people went
and purchased the Windows 98 upgrade, which would include all those technologies
and which did have a fee associated with it, then people would perceive
the Windows 98 upgrade as having more value.
The court: All right. But you wanted to maintain
the integration.
The witness: I wanted to maintain--major thing
I wanted to do was get Internet Explorer 4.0 shipping.
The court: All right.
The witness: Because I believe that was an important
release of our internet technologies, and I didn't want to have to go do
engineering work to try to do things differently late in the day.
The court: You wanted it to ship as an integrated
part of windows 98; is that correct?
The witness: Well, Internet Explorer 4.0--
I guess Mr. Maritz is trying to convince the court that Windows 98 and IE 4.0 are different and separate products?
The court: As an integrated part of Windows 98?
The witness: An upgrade to Windows 95 and then
as an integrated part of Windows 98.
Ok. So a branded product such as IE 4 is both an application with Windows 95 and an integrated part of Windows 98?
The court: Okay. And the primary objective
in doing that was to increase browser share as you describe it, or as you
had described it here, to get more people to use Windows 98?
The witness: Getting Internet Explorer 4.0 to ship
as an upgrade first to Windows 95 and then to be included in Windows 98,
yes.
The court: To get more people to be using it?
The witness: Correct.
The court: i.e., To increase browser share?
The witness: Correct.
The court: or have more people using your browser?
The witness: That's correct, sir.
The court: All right. I got it.
This dialog could be considered two ways by the court. 1) it could be considered just as an effort to quickly ship products to market or 2) an extended effort to actually achieve a monopoly position in browsers. The former is fine. The latter interpretation however supports the DOJ.
The problem is that the judge now knows that the idea that IE and the OS can not separated is of course a bogus position. Microsoft itself considered doing just that (at least in part).
And, the judge was trying to get Mr. Maritz to say that IE could not be split up and sold separately because only one product existed. Mr. Maritz missed an opportunity here. He may have only shown that two products existed and not separating them had nothing to do with technology.
Every company wants to sell their products to all consumers. That is a given. But, the picture being painted here is not one of a company giving consumers a better choice and hoping that marketing will be successful. The picture is of Microsoft basing its key decisions upon which alternative will force more consumers to buy and use Microsoft products.
Mr. Maritz clearly insists upon a higher market share as being the most important consideration in this Q&A.
4:20 PM PST - But, "just how much is Microsoft charging for IE?".
Transcript Jan 26, PM:
q. You are responding, are you not, to a proposal that had been made by Mr. Belfiore and supported by Mr. Dunie to split apart IE 4 and to charge for a piece of it separately?
a. Correct.
q. And you say in the first line that this proposal is tempting, but we have to remember that getting browser share up to 50 percent or more is still the major goal; correct?
a. Correct.
This Q&A is interesting for a couple of reasons:
1. IE 4 is clearly identified as a product separate and apart from the OS. (Not even Mr. Maritz would suggest pulling the file system out of the OS just before shipment.)
2. A real question is being raised as to charging for IE separately. Both Microsoft and Netscape have established retail prices for browsers in the marketplace. So, this choice is a real possibility.
3. This dialog does not address allocating the price of Windows 98 between the OS and IE as I have suggested in previous articles might have been done or should have been done; however it does suggest that if IE on its own has a retail market value. That value might be a starting point for deciding just how much of the Windows 98 price is being paid for IE. (Not disclosing the price for IE does not prove a zero price. It only proves the price is not disclosed.) Only a detailed evaluation of the pricing decision itself can help answer that question.
4. And, finally, Mr. Maritz wants desperately
to get "browser share" up to 50 percent. This is interesting
because if the DOJ wants to prove that Microsoft has tried to monopolize
the browser market, the 50% figure is critical.
3:55 PM PST - How can Microsoft possibly decide what goes into the box for a Solaris customer?
Transcript Jan 26 PM:
q. Let me see if I understand what you're saying. Are you saying that consistent with your testimony at your deposition, Microsoft has never made an estimate of how much it spent to develop its browser, but what you could give me is an estimate as to how much a certain part of the organization spent?
a. Yes. And as you look over the page further on in my testimony, I do say that if you ask me to come up with an estimate for specific technology areas, we might be able to go to another level of detail, like how many people working on the html rendering engine, et cetera. And the point I was trying to make in my testimony here is that you have to get into the definition of what is and isn't a browser, which, at various points in time, we didn't really try to get into because it wasn't a particularly interesting question to us.
This is hog wash. Maybe Microsoft does not keep adequate records nor adopt accepted accounting principals, but to suggest that Mr. Maritz does not distinguish what is or is not a browser is to suggest that Mr. Maritz would never be able to decide what goes into the IE box for Solaris, Hp-Ux, Mac, Windows 95 and NT. I guess just which modules that go onto the CD-rom or in the file for download is just not "a particularly interesting question"? IE has been accurately identified multiple times by mr. Maritz or someone, otherwise product could never be distributed. Suggesting that records on expenditures are lousy is one thing. Suggesting they were not kept because no one knows where one product ends and another begins is garbage.
I wonder how Windows 98 customers like being
charged for the development of IE for Solaris and HP-UX?
3:25 PM PST - Microsoft clearly was focused upon "Netscape's Air Supply"
Transcript Jan 26 PM:
q. Mr. Maritz, before the luncheon recess, we were talking about Microsoft studying Netscape's revenues and where Netscape got its revenues, and in that connection I would like you to look at a document that has been previously admitted as government exhibit 343.
(document handed to the witness.)
q. And what I'm particularly interested in is on the second page at the bottom--and it is a memorandum dated August 27, 1996, on the subject of Netscape revenue breakdown. And when you have had an opportunity to read this sufficiently to respond to questions about that memorandum, please let me know.
a. Do you have a specific question in mind so I could guide my reading?
q. Yes. The first question is whether what Mr. Nehru here says, which is that Steve Ballmer has asked to coordinate a drill-down on Netscape's browser revenues to understand where they make money and get back to him in two weeks. He suggested I contact all of you. I would be grateful if your organizations could help us to get data to answer this question. In the latest quarter ended June 30, 1996, Netscape browser revenues were $45 million. For fiscal year 1997, January 1 to December 31, Netscape's browser revenue is projected at $270 million worldwide. net, we are trying to categorize the 45 million and 270 million figures by channel and subchannel to see how this can pencil out. And my question is whether that is consistent with your understanding of the kinds of analyses of Netscape's browser revenues that Microsoft was undertaking in and about 1996.
a. Thank you. I will have a quick read-through and be right with you.
(witness reviews document.)
a. Go ahead, Mr. Boies.
q. Is the analysis that Mr. Ballmer was asking for here consistent with your understanding as to the kinds of studies that Microsoft was doing of Netscape's revenues and where those revenues came from in and about 1996?
a. It's consistent with the kind of analysis that we try to do of our competitors, so I believe it would have been consistent with what we would have been doing in that time frame. At least I could tell in my quick span, I'm not copied on this string of mail here, so you're hearing my surmise.
q. Well, sir, as an executive in your position, were you aware in 1996 that these kind of studies of Netscape's revenue breakdown were being done?
a. At this time frame, August of 1996, I'm not sure. As I testified earlier, I was aware of us doing studies on Netscape.
q. You're aware of doing studies on Netscape's revenues, but you just don't recall when those were done; is that what you're saying?
a. I don't recall specifically when they were done. As I said, this is August of '96, and I don't have a precise recall of what was going on then.
I really hate to observe the obvious in this exchange in Q&A, but: It sounds like Microsoft picked products for bundling with their OS (integration, if you insist) based upon the financial harm it might cause Netscape. What does better software and feature integration have to do with a detailed study of just where a competitor gets their revenue? Do you suppose Microsoft wanted to offer a competing application to the market? Do you suppose Microsoft wanted to conduct a market study by looking at the revenue stream of another company?
Oh. I almost forgot, Mr. Maritz never
said to anyone that Microsoft would deprive Netscape of their air
supply nor anything similar or to that affect.
2:45 PM PST - If the word "browser" suggests a separate product, what does buying a trademark suggest?
q. "the name `browser' suggests a separate thing."
a. The name `browser' suggests a separate thing. And I would not phrase the survey, or other things, only in terms of `put the browser in the os.'" And he goes on to devote considerable space in the rest of this mail about why it's important to explain to people the benefits of the integration that we're doing.
Just when did Microsoft buy the trademark "Internet Explorer"? Was it not sometime in October 1998? And, yet Microsoft is worried about the use of the word "browser" suggesting a separate thing?
Microsoft is eating a piece of chocolate
cake while visiting the dentist. Got milk?
2:20 PM PST - Since when is the word "products" singular?
q. Let me refer to the time frame of early 1998. Are you aware of concern in that time period about how does Microsoft change the way words are used so that the word usage will support and not undercut the arguments that Microsoft wants to make?
a. I am aware that roughly in that time frame there was some concern about how we were expressing our marketing messages. At that point, we had released Internet Explorer 4.0 and we were building up for the release of Windows 98. And, as you know, one of the key features of those products was integration with Windows. and I do know that there was concern about trying to make it clear in our general marketing messages that we considered Internet Explorer to be now integrated completely into the windows environment and that that was a key benefit to customers and we wished to get that message out there.
Well. Here Mr. Maritz clearly refers to two separate and trademarked products, IE 4.0 and Windows 98. He even refers to them as "products". But, of course in order to try to fabricate an antitrust defense he has to somehow change semantics, add the word "integrated" and force all consumers to buy both?
And all of this is based upon semantics? IE 4.0 is a separately branded product on a bunch of operating systems including those from Microsoft.
Use of semantics does nothing to untie products
or return choice to consumers. This is simply a fabricated antitrust
defense based upon little more than selective use of words some of the
time. Hear Mr. Maritz himself deviates from this plan and refers
to products in the plural. Gosh. To think of such a possibility.
2:12 PM PST - But, IE is not integrated as other technologies.
Transcript Jan 26 AM:
q. Your counsel gave a precise answer of "yes." Is that the right answer?
a. We have made an effort to try to use the word "browser technology" or "internet technology" for the reasons that I gave, which is we were trying to stress the fact, since it's been made an issue in this case, that we considered it to be a technology that we would integrate with the operating system in the same way we've done with others technologies, networking shell, multimedia, et cetera.
This is a false technical statement. Some technologies may only be available as part of the OS. But, IE does not so qualify at all. IE (same brand name) is distributed clearly as an application on Solaris, Hp-UX, Mac, Windows 95, Nt and even Windows 98.
Microsoft itself has insisted that IE be an application available on multiple platforms. Is Microsoft now claiming that it is integrating with Solaris and the Mac?
1:45 PM PST - Fabricating a legal defense, as it were.
q. Well, it's not really quite the same as you use those words, is it, sir? For example, in the browser area, you've made, over the recent period of time, a concerted effort to change the way words are used, right, sir?
a. I am aware that in preparation for this trial, we have tried to use the word "internet technologies" or "browser technologies," precisely because the plaintiffs in this case have tried to make out that the usage of the word "browser," unqualified by anything else, implies that the browser is, of necessity, a separate application from the operating system. and so we've just tried to make it clear that that's not our view. But, as I pointed out earlier, I use many other words that clearly refer to parts of the operating system, without having to "post-pend" or "pre-pend" a qualifier to them.
Of course not. If IE is offered as a choice to consumers, some may not buy it.
In this column I made reference to the date a Microsoft web page was apparently altered to read "internet technologies" rather than "browser". That page was changed after this suit was filed.
I guess now we will see Microsoft sell "Word Processing Technologies" and "Flight Simulator Technologies", but never applications. Applications nor any other descriptive word used by the industry can be used by Microsoft to refer to products for fear that they will not be able to force the sale of those products upon all consumers via bundling.
The use of the word browser or application by Microsoft is really not that important.
When Microsoft puts a product into a box and distributes it to run on Solaris, Hp-UX or the Mac, the industry just calls that an application and moves on. Semantics do not afford any defense here. Mr. Maritz is going through contortions on the stand trying to avoid referring to browser technology as anything but part of Microsoft's OS. But, that is a wasted effort.
The real issue in this case is not what
you call or label it. The issue is whether a monopolist can tie the
hands of all consumers and force them to buy technology they do not in
fact want. Certainly when this case was filed, the majority of computer
users either did not use a browser at all or preferred Netscape.
This fact has not escaped the attention of Mr. Maritz. He just claims
that all consumers must want his products regardless of what they think.
12:50 PM PST - Paul Maritz identifies another possible threat to Windows further increasing the cost to consumers?
Transcript Jan 26, AM:
q. Let me be sure that I understand what you just said. I understand that you've said lotus notes is of concern, and you've used the term "of concern" several times in your answer. my question is not whether it is of concern. My question is whether or not you consider lotus notes to be a potentially serious platform threat comparable to what you have described as the potentially serious platform threats posed by the netscape browser and the java foundation classes?
a. It's comparable.
Perhaps we should add Microsoft's competing vision for Lotus Notes (Microsoft Exchange and Office) to the technology that should be incorporated into the OS as a "necessary and logical" addition? Right?
The real problem with Microsoft's defense that IE should be part of the OS is that if you accept that position, then all consumers are or soon will be forced to purchase whatever technology Microsoft needs to develop to prevent alternative platforms from having merit in the industry.
This is called "Consumers must get out their plastic defense". This defense suggested by Microsoft is not at all based upon technological considerations. The reality is that operating systems and applications have been separated from each other since the beginning of the industry. The reasons still apply.
In the mid to late 70's there was a company that offered a combined Os, Basic language and Data base system to the marketplace. (I can not recall the name but is was something like LINK or LINKS. -- Pick OS was the one I could not remember ... thanks to a reader...Pick is still alive and well apparently but Microsoft failed to mention them as one of their ghost competitors) It competed with minicomputers at the time. The point here is that combining the operating system with middlewear or language support may sound logical to some. Obvious to that company back then it seemed like the right thing to do. But, it was not a good idea in the end. The reason was simply that users of that operating system could not choose other languages nor other data base management systems. It was a forced combination. The result was that in time the combined technologies failed due to the fact that forcing the match reduced attractiveness in the marketplace. That company did not have monopoly power. If it had, then bundling the OS with the database system would have precluded all other data base technologies from developing any further.
This is the fundamental problem with accepting Microsoft's claim that it should be able to bundle technologies whenever it appears to them to be "logical and necessary". Accepting that argument only suppresses alternative technologies.
Mr. Maritz in his testimony does identify potential competition in browsers, Java and Lotus Notes. But, that does not justify Microsoft using its monopoly power to preclude those ideas and concepts just because it is not owned by Microsoft.
12:15 PM PST - The "necessary and logical" strategy to prevent competition?
Transcript Jan 26 AM:
q. Well, let me see if I can get something other than an opinion. Did you ever have a discussion with Mr. Gates in which Mr. Gates, in words or in substance, said what he is purported to have said to this reporter?
a. I don't recall a discussion where those particular words were used. I do recall many discussions with Mr. Gates where we discussed our strategy of integrating internet support into the operating system, which we considered a necessary and logical strategy.
A "necessary and logical strategy"?
Certainly if the goal of Microsoft is to prevent competition from Netscape this would be "necessary and logical" too.
But, consider the more broader ramifications of what is being said here.
1. Would it not be just as "logical and necessary" to integrate word processing with the OS? Of course.
2. Would it not be just as "logical and necessary" to integrate the spreadsheet with the OS? Of course.
3. And, the SQL data base server?
4. And, the Access data base system?
5. And, the web page designer applications?
Would not all and every application ever written by Microsoft meet this same test if a competitor became significant?
Clearly they would.
So how do you decide which technologies must necessarily be un-separable from the OS and which ones do not?
The short answer is that you can not under any circumstance allow the monopolist to draw and move the line as it may become convenient. Why? Because to do so is to give the monopolist the unfettered power to preclude competition at will.
Microsoft has in fact been doing this for
a number of years. (Stac, Lantastic, Novell, Real Networks, Caldera and
others are all companies that have suffered from this practice.)
11:47 AM PST - Paul Maritz admits corporate policy to make certain no internet technology has a viable marketplace.
q. Now, you've already testified that your statement that "we are going to cut off their air supply" is a statement that you did not make. What about the second part of the statement that is attributed to you here, "everything they're selling, we're going to give away for free." Did you say that in words or in substance?
a. I did not.
q. Have you ever said that in words or in substance?
a. I may have pointed out on occasion that the base internet technologies, the browser and the internet server, we were going to incorporate into windows and not charge for it separately, but I don't remember using those particular words.
The above Q&A is interesting for two reasons:
1) denying a quote made in public permits cross examination to revisit that quote time and time and time again in an effort to ascertain whether the statement was made or not. This can be a significant mistake for a witness. In this case, Mr. Boies, the DOJ attorney, is taking the opportunity to give this statement much higher exposure to the judge and the press than if Mr. Maritz would have just admitted making the statement. BIG MISTAKE.
2) the answer provided here by Paul Maritz discloses a corporate policy to bundling their own version of any significant technology with the express purpose of preventing a marketplace to develop around those technologies. When Mr. Maritz discloses the corporate objective of "incorporating internet technologies" (browser and server) into their monopoly product, he has effectively made the case for the DOJ.
This policy disclosed by Mr. Maritz points out why it is so important that the antitrust laws be effectively applied in this case.
For Microsoft supporters and big shareholders, the idea of Microsoft using its monopoly power to muscle into the next technological front without having to compete on price, terms or technology is indeed attractive. The only problem is that it clearly violates antitrust law.
Antitrust law is designed to prevent the holder of monopoly power to use that raw power to gain a monopoly position in another related or unrelated market. Should Microsoft be permitted to simply bundle its monopoly product with internet technologies, no other company could possibly be expected to compete. Could you earn a wage if someone is always standing by having your same skills but willing to work for nothing? And, if you move, another person follows you to do that again and again?
What Mr. Maritz has testified here to is
corporate policy to prevent any internet technologies market to develop
if they can possibly accomplish that. This policy has apparently
extended even to the risk of antitrust litigation which may end up splitting
the company itself.
10:11 AM PST - ProComp releases their half-time report on the Microsoft Antitrust Trial
The ProComp organization favors the DOJ view of this case (as do I). In the above release, they have tried to lay out the case offered to this point by the DOJ. As always you have to understand where your material is coming from in order to put it into context. However, this review is in stark contrast to the public comments made by Microsoft lawyers on the court house steps that "no admissible evidence has been submitted by the DOJ in support of their allegations". As anyone can see by reading this report released by ProComp, the statement made by Microsoft is categorically false. It was made only to influence and simply was not even a fair representation of reality.
The next time I mention deceit and consumer fraud in conjunction with Microsoft, keep in mind the above comparisons. The next time I mention a possible class action stockholders suit, keep in mind the above comparisons.
I think it is fair at this point to reiterate my position in this litigation.
I represent no company when I prepare and post these articles. I
am not funded by any consumer organization. I am not funded by any
industry supported competition organization. And I have no personal
or business reasons for drafting articles contrary to the positions and
statements of Microsoft Corporation. All of these articles and comments
are my own. Yes, I am an attorney. And, yes I am a software
developer. But, neither of these two careers or vocations disqualify
me to comment as I have done and will continue to do so.
January 26, 1999 - Tuesday - Review of Paul Maritz testimony
2:30 PM PST - Paul Maritz claims Microsoft did not care about market share for browsers?
I am still waiting for a witness from Microsoft that offers a believable testimony.
1:45 PM PST - Sounds like blocking distribution of Netscape products to me.
Jim Maritz is beginning to sound just like Richard Schmalensee, presenting false testimony.
Come to think of it Bill Gates should be included too.
Each one of these witnesses claim to be intelligent and understand the industry. But, they have each been obviously coached to falsely represent reality. They contradict themselves. They present illogical arguments. And, they seem to quote advertisements or press releases rather than address the questions posed to them.
I guess any witness can chose to give false testimony. But, almost all judges are expert in making that observation.
The term "corrupt culture" comes to mind again and again.
11:42 AM PST - Sounds like a deal between IE and Microsoft Office on the Mac to me.
Transcript Jan 25, PM:
q. In this agreement, what's basically going on is that Microsoft is agreeing to develop and release Microsoft office for Macintosh, and Apple is agreeing that as long as Microsoft does that, but only so long as Microsoft does that, Apple is going to bundle IE, make IE the default browser, and promote IE.
a. There is a linkage between the time frames. In other words, where using the duration during which we would be obliged to do Office to also give a duration for Internet Explorer. But as I said earlier, these three agreements were negotiated together.
The linkage between IE being sold by Apple and Microsoft providing Office software is very clear.
Mr. Maritz tries here to link the IE/Office deal with the others. But, it is not linked at all.
If Apple stops promoting IE, what happens? Office stops, right? But, the cross licensing does not nor does the value of the preferred stock drop to zero. In fact, nothing happens with those other two deals.
If Microsoft stops writing Office for the Mac, what happens? Apple can drop support for IE, right? No affect with the cross license agreement nor the stock deal.
The stock deal and the cross licensing deal are totally independent of the deal between Apple and Microsoft over IE and Office.
But, what else? What does Apple get? Apple gets to promote IE. And, Apple gets Microsoft to remain as an ISV (no money, just an ISV). Now, having an ISV for the Mac is important. But, the value is really in not loosing Microsoft as an ISV of the all important Office suite. So, instead of going bankrupt Apple gets to promote IE.
That simply does not sound at all like a selection of the best available technology for promotion and sale. That sounds more like extortion. Apple is forced to promote IE and as long as they do that they can promote more Microsoft software. With the former they can do without. With the latter they simply can not. Apple must do this deal. According to the terms of this deal, the day following the signing and every day thereafter Apple must continue to promote IE or risk loosing the Office product for the Mac.
Regardless of what Apple did, the preferred stock was a done deal and the cross licensing was a done deal. However, should Apple ever decide not to promote IE, Microsoft would or could wiggle out of the Office Mac suite. Further, who decides if Apple is doing enough? Just how much must Apple promote IE to keep Microsoft happy?
I have seen commentary that suggests Apple
somehow got the best of Microsoft. I can not see how. It gave
preferred stock for any money. It dropped a potential legal claim
and signed a cross licensing agreement (possible for value). And, it agreed
to support Microsoft software (make sure Office for the Mac works okay,
and actually promote IE). How does any of that benefit Apple other
than to avoid bankruptcy at that time and leave forever a cloud hanging
over it under the control of Microsoft?
10:38 AM PST - Paul Maritz apparently does not know much
Transcript Jan 25 PM:
q. Okay. That's what I was asking. Are you aware of any actions that Microsoft took specifically to try to restrict Netscape's browser distribution?
a. I'm not aware of any actions that we took to specifically restrict Netscape's browser distribution, no.
I guess he is talking about not knowing about bombing trucking routes, or something.
10:15 AM PST - At least 10% of the retail price of Windows is IE?
q. Well, let's start with what the R&D and marketing for Windows is.
a. It's approximately a billion dollars.
q. A billion dollars for the two combined?
a. For R&D and marketing? Approximately.
So if R&D for Windows is a billion and
R&D for IE is 100 million then IE would be about 10% of the R&D
budget. Does this suggest that at least 10% of the retail price for
Windows ought to be attributable to IE? That could be one way to
look at it (very roughly). What is the other? Tell all consumers
it is free but include IE in "unearned revenues" which are about 20% of
all Os revenue. Okay. That is two ways. Neither is zero.
Microsoft claims it is doing the later and denying it is doing the former.
Sounds like IE earns lots of money for Microsoft either way. Boy,
forced sales are nice. You can not loose.
10:02 AM PST - IE is a loss leader? I do not think so.
Transcript Jan 25 PM:
q. Well, why don't we start with windows 95 and windows 98 first, and then I will ask you for the others.
a. Our revenues from Windows 95 and Windows 98, on an annual basis, are about $3 billion.
Microsoft has published financial reports
claiming that 20% of all OS revenue is attributable to unearned revenues
which they say includes IE. 20% of 3 billion is $600,000,000.00.
The half billion in R&D was over 5 years time. Now, unearned
revenue accounts for more than just IE. But, over a five year time
frame that is approximately 3 billion (there is that figure again) in revenue
to cover IE R&D, etc. And, this is Microsoft's position assuming
a zero price for IE disclosed to consumers. Remember, I see no reason
why a substantial part of the Windows 98 price is not IE related.
9:44 AM PST - Maritz is right because Schmalensee is right and vice versa?
Testimony, Jan 26 PM:
q. Can you be any more particular than just saying "in the thousands"? Is it in the tens of thousands?
a. It may be. As dr. Schmalensee testified, the critical thing here is not the total number of applications that are available but the key applications and the quality of applications that are available.
Oh. Really? I remember Mr. Schmalensee claiming the same thing, that the number of applications was not important and that Maritz would testify to that accordingly.
Neither of these witnesses believe that statement themselves. If the key was based upon the basic office suite of applications, those thousands or tens of thousands would not exist.
Does Mr. Maritz really think a dentist is going to use a spreadsheet for billing? Or a doctor? Or a lawyer? Or a printer? Each one of these thousands of applications is highly significant in establishing a meaningful OS. There are numerous applications on Windows for a reason even if Mr. Maritz claims not to understand why. His testimony in this regard is just falsified.
8:00 AM PST - Somehow Paul Maritz is just not believable.
I guess the big question everyone wants to know is why Paul Maritz said Microsoft would snuff out Netscape's air supply. After all, they did do that. Netscape was forced to find products other than browsers to earn an income. And, Microsoft has even given away their web server as well making it even more difficult for Netscape to sell products.
Monopolies can easily do that by the way. Just jack up the price of a monopoly product and give away the version of any software offered for sale by a competitor. Or, just bundle the two allocating the price between the two products and forcing the sale of IE for money that way. Either way, all consumers are forced to buy IE and any demand for a browser is all but eliminated.
But, now comes Paul Maritz denying that he uttered such remarks. Actually, he was not so sure a few months ago, but now with the stock price going up like it is, perhaps his memory is getting better. Now, he is sure he did not say that.
I really hate to make any comparisons here, but Paul Maritz is sounding like OJ Simpson would if he had been caught threatening the life of his wife. OJ was found innocent and apparently did not threaten her life. But, Microsoft has in fact precluded Netscape from the market just like Paul Maritz is given credit by witnesses from Intel. So, we are to believe that Maritz did not threaten what he carried out? Despite witnesses that quote or paraphrase him quite well? If the threat were not carried out, then the Intel boys may have to explain where they got their ideas. But, that is not the case. Microsoft has in fact snuffed out the air supply of Netscape. And, no other browser technology not controlled by Microsoft is likely to emerge either.
Keep in mind however, threatening to ruin a market used by a competitor to sell products is not much of a violation. It is most likely fair to say that just the threat is meaningless. Carrying it out is the antitrust violation. So, why Paul Maritz would risk committing perjury over the threat is interesting indeed. Falsely testifying about what was said to other possible witnesses does nothing for the creditability of Paul Maritz.
The other interesting observation is in regard to the Apple deal.
Paul Martiz is hoping to down play the significance of forcing Apple to distribute IE rather than Navigator.
His testimony seems to suggest that when Apple was holding a patent suit over Microsoft's head, that somehow Microsoft was forced to do something to make that threat go away. Are we to believe that Apple wanted to distribute IE so badly that it raised the ugly head of the patent law suit? What was it that Apple used to get the IE deal anyway? Apple could have just picked IE if they wanted to. Microsoft would not object.
Mr. Tevanian has testified that Microsoft forced Apple to distribute IE and discontinue the deal with Netscape by threatening to slow up development for Apple platform products. Just what is Mr. Maritz suggesting Microsoft offered to Apple (rather than backing off of a threat) to get Apple to distribute IE? Is Maritz suggesting that Microsoft paid more to Apple than otherwise necessary to settle the legal dispute? To get people to do what you want, either you offer them something they want that they can not get otherwise or you discontinue a threat or cost that you could impose on them. I fail to see how settling a law suit is supposed to help Apple unless the terms were better for Apple than otherwise obtainable. But, did not Microsoft suggest the Apple suit was for billions in claims? So, I guess the secret settlement was billions "plus"?
Being able to do business with Microsoft is not more valuable than the products themselves unless doing business eliminates the loss of business that might result if you were "cut out".
Maybe a careful reading of the testimony will shed some light on this deal. But, so far I fail to see what great benefit Apple got for switching to IE (except for getting Microsoft to develop Mac applications on time). They settled their pending law suit. They got Microsoft to invest in Apple stock. But, in both of those situations, Microsoft got fair value in exchange. Just what was the consideration that got Apple to switch to IE. Just what did Microsoft give up to get that part of the deal?
Yes. I know. The only reason anyone buys IE is because it is superior technology.
January 25, 1999 - Monday
4:30 PM PST - New Modes of Competition: Implications for the Future Structure of the Computer Industry" by Professor Timothy F. Bresnahan
I will be reviewing this article in the future. However, as I have mentioned often, I link to articles regardless of their viewpoint. The only criteria is whether it is relevant to the issue.
12:15 PM PST - Professor Timothy F. Bresnahan asked to examine potential remedies.
Too early you say? I would disagree. No remedy in this case should be considered without some serious and extended debate both public and private. Certainly no judge should have to fashion a remedy in a vacuum.
I have already drafted very short articles on both a horizontal
split as well as a vertical one.
I have also tried to link to any and all articles
on the subject of possible remedies in this case. I intend to continue
to do so. Yes. I have my own views of what may be necessary,
but I do not believe in carefully selecting only those articles that happen
to favor one or more of my own views.
Daily Wrap and Flow - Week 13
Daily Wrap and Flow - Week 12
Daily Wrap and Flow - Week 11
Daily Wrap and Flow - Week 10
Daily Wrap and Flow - Week Nine
Daily Wrap and Flow - Week Eight
Daily Wrap and Flow - Week Seven
Daily Wrap and Flow - Week Six
Daily Wrap and Flow - Week Five
Daily Wrap and Flow - Week Four
Daily Wrap and Flow - Week Three
Daily Wrap and Flow - Week Two
Daily Wrap and Flow - Week One