Battle of the titans

What an irresistible spectacle: almost as good as watching Arthur Andersen managers squirm earlier in the week under relentless Congressional questioning over why all those Enron documents got shredded. Or it would be, if it weren't for the fact that no matter how the suit comes out Internet users will probably be the losers.

The New York Times ( here), in reporting the case, points out that AOL and Microsoft really don't compete directly today. In a sense, that's right. AOL is an ISP and a media company; Microsoft sells software. (In another bit of legal entertainment, FreeServe has asked the Securities and Exchange Commission to investigate AOL's claim in its quarterly filings that it is the UK's leading ISP. Nasty.) The areas of overlap are small but real: Web browsers (Netscape vs. Internet Explorer), instant messaging (AIM and ICQ vs. MSN Messenger), media players (Winamp vs. Windows Media Player), Internet access (AOL vs. MSN), content (MSNBC vs. Fox, CNN…).

In most of those areas, one of the two companies is clearly dominant.

AOL wins instant messenging, content, and Internet access. Microsoft wins Web browsers and media players. But if you accept the facts found by the US courts, Internet Explorer dominates because Microsoft abused its monopoly position to attack Netscape. Hence the justification for the suit.

The Bush administration's decision to settle the Microsoft antitrust case was, more than anything else, a rerun of the 1995 consent decree, in which Microsoft promised to go forth and sin no more. The company then used Windows to leverage Internet Explorer onto everyone's desktops. Little has changed since. Passport aggressively reminds Windows XP users to join the single log-on system; media players embedded in Windows arguably target independents like Real Audio (and AOL's Winamp) the way Internet Explorer did. If you buy the contention ( here) that peer-to-peer networking is the future of the Net, who controls instant messaging is a key to that future - and Microsoft with its desktop monopoly has a good chance of steering users in its direction.

If you remember, the reason Microsoft was so panicked about Netscape was the greatly hyped belief of the day (say, 1994) that Web browsers were going to displace Windows. Netscape built browsers for all the popular operating systems. This part of AOL's acquisition of Netscape was rather ironic. AOL has never publicly offered a Linux or UNIX client, and its commitment to the Mac has been slowing ( here).

The Web-is-everything hype got even stronger after Java showed up, and the death of Microsoft was widely predicted - until the company suddenly "got Net". As we know, so far Java hasn't taken over the planet, people do not use their Web browsers to run word processors across the Net on thin clients, and Microsoft is still growing like the Hydra.

If you assume, however, that the famous "convergence" of popular song and story is merging not just broadcasting and telecommunications but also content, things look rather different. Before Windows XP's official launch, Microsoft conducted a briefing on its "product activation" features for a bunch of suspicious hacks. The company's strategy seemed bizarre: XP has to be activated. But for most users this will be done by their sysadmin or dealer. And you can put it on as many PCs as you like as long as it's more than 120 days apart. Or you can phone and present your case and the operators will trust you and unlock the software for another installation.

Yet the company insisted the target was not determined bootleggers but deterring "casual copiers." I remain convinced that this apparently hare-brained scheme is a first step and the real goal is beginning to lay the infrastructure for a comprehensive system of digital rights management: control over content and how it's used. A slice of every one of those transactions will be huge business. In this area, AOL, with its ability to completely control the user's online space and its vast range of content, will indeed be a thorn in Microsoft's side - and vice versa, even more strongly.

Bear in mind that I am no apologist for AOL ( here). Its excellence at packaging the Internet for the mass market, particularly in the US (even though I'm mystified by its popularity) cost the Net many of its community standards. The latest example is its hard-coding AOL 6.0 and 7.0 to send all email in HTML formatting, making it impossible for AOLers to send out messages in plain text. There is little doubt that if AOL wins out over Microsoft - either legally or in the normal course of the Internet business - it will be the next to be accused of monopoly practices.

But at the moment Microsoft's ability to leverage its desktop control into control over servers and the infrastructure for ecommerce (with its .NET platform), the conversion of software into a service and the delivery of content is the bigger threat. For now.

(Thanks to Mary Branscombe ( here) for her help with details about AOL.)

Previous Columns
By any other name
Creative Accounting
Dumber people can run Windows
2001 in review
Care in the community
Remembran ce of postings past
BT's Stupid Patent Tricks
Preserving our freedoms
It's beginning to look a lot like Christmas
Net is the mother of re-invention
Save the Cookie
Digital rights and the new era of world terrorism

Wendy M. Grossman, whose Web site is pelicancross ing.net, is author of From Anarchy to Power: the Net Comes of Age (NYU Press, 2001), net.wars (NYU Press, 1998), and the Daily Telegraph A-Z Guide to the Internet (Macmillan, 2001). She can be reached at this email address.

Copyright on all articles published in the INQUIRER is hers.