Is Gates pulling the Net's strings?

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So it is understandable if a bunker mentality has emerged from its latest battle over a seemingly innocuous service called instant messaging. AOL is, after all, crossing swords with perhaps the most formidable opponent of cyberspace--Microsoft--in a digital holy war that pits the leading online service's prowess in the mass consumer market against the software giant's laser-like expertise in technology products.

Many industry executives and analysts initially played down the messaging standoff between AOL and Microsoft as a relatively confined skirmish between two companies pushing their versions of similar products. But a closer look reveals some unsettling parallels between this conflict and the early days of the now-legendary rivalry between Microsoft and Netscape Communications over the Web browser.

"This is exactly the same thing that Microsoft did in '95-'96. They basically said that Netscape was the evil empire and that it didn't stick to standards," said Ramanathan Guha, chief technology officer of start-up Epinions and former principal engineer with Netscape. "Now that they seem to be ahead in the browser wars, they've put a different spin on things. Everybody but the leader likes open standards."

The competition with AOL rose to new heights yesterday when Microsoft disclosed that it is considering free or low-cost Internet access. Such a move, which would be led by the same executives who spearheaded Microsoft's browser campaigns, could be an instant replay of the Internet Explorer giveaway that eventually undid Netscape.

As with browsers, the fight over instant messaging is part of a larger conflict involving these and other major players that will ultimately determine who controls the Internet itself. At this early stage in the development of the medium, these clashes are only the first of many monumental battles over key technologies and the industry standards that govern them.

Just as the PC fundamentally changed the way we work, Web-based technologies are defining the era of Internet computing and revolutionizing the way we live. Yesterday it was browsers, today instant messaging, and tomorrow digital wallets, interactive video, and an entirely new Web language called XML--all areas where Microsoft is heavily involved.

"There is no question that the Net is changing the paradigm of the desktop and of computing," said David Simons, managing director of Digital Video Investments. "However, unlike the wholesale change envisioned three years ago by the Net PC and Java, the process is highly incremental and full of unforeseen twists."

Those winding roads have brought AOL and Microsoft face to face from opposite corners of that universe: one focused on product, the other on the consumer. Where AOL has attempted to fashion its service around the demands of its community, Microsoft has pushed the use of its products through business channels and alliances, giving software developers as much incentive as possible to write their applications to work with Windows.

The nexus of the world's largest software company and the leading online service shows how quickly divergent businesses are heading in the same direction--away from the largely saturated desktop PC market and toward Internet-connected pagers, handheld devices, interactive television, and other non-computer boxes.

These are markets that Microsoft has targeted with its scaled-down Windows CE operating system, but with limited success. "For the first time, a complete product that is completely Microsoft-free is now within reach," said David Cassel, publisher of the AOL Watch newsletter and frequent critic of the online service.

It is this kind of talk that worries Microsoft most: the specter of new products that ignite enthusiasm among the masses and threaten to grow well beyond their original designs, much like today's PalmPilot craze. AOL, with its purported 17 million members and 78 million registrations for instant messaging, could spark an Internet wildfire.

"Instant messaging is an alternative to a browser, in a sense. You have this application open all of the time. It has a search feature in it if you need to do a quick Net search. It can deliver ad banners or active banners," said Paul Hagan, a Forrester Research analyst. "All of the sudden you have this competition with the browser. It's become a really potent way to deliver content to the desktop."

The fact that both companies are meeting on unfamiliar terrain could help AOL, for Microsoft is accustomed to engaging its enemies at the corporate level, not the newbie mass market. "Microsoft has never been good at making things trivially easy for people," Guha said.

Some scoff at the notion that instant messaging deserves the full wrath of Bill Gates. But signs from his command post in Redmond, Washington, are chillingly reminiscent to Netscape veterans who saw Microsoft's share of the browser market go from single digits to leading the market in a few short years, with some projections reaching 80 percent of desktop PCs.

That's what happens when Microsoft detects even a hint of a threat to its coveted Windows franchise, for it knows how easily a software leader can be toppled from its perch. In a CNET interview three years ago, while some skeptics were still questioning the significance of the browser, Microsoft executive Steve Ballmer said Netscape's Navigator could effectively displace Windows as the first screen booted up on the personal computer.

"Let me tell you a story. Once upon a time there was a piece of software that was an extension of an operating system, and it had a nice little user interface and it had some programming interfaces and people kind of liked it, and over time they built on top of it. One day, the thing that it was built on top of wasn't all that important anymore," said Ballmer, an outspoken college buddy of Gates who is now president of Microsoft. "I'm telling you, of course, the story of Windows 95, Windows, and DOS. And when we tell the story about what's happening today with browsers ten years from now, I want the thing that replaces Windows to be Windows."

The truth is that Microsoft doesn't care what that first piece of software is called or what it does--it just wants to own and control it. If history does repeat itself, such technologies may fall into familiar pattern in which the Redmond empire wields its influence over competitors, allies, and ostensibly impartial industry organizations to become the dominant player in an important arena.