AOL, Microsoft rift expands

The software, code-named Komodo, would allow AOL Time Warner's America Online and CompuServe services to support multiple Web browsers, including AOL Time Warner's Netscape products, according to information first obtained by Betanews, a Web site that tracks new software releases. Two sources within AOL confirmed the document's authenticity to CNET News.com.

"Komodo will reduce AOL's dependence on any single provider of browser technology," the document reads.

The development will likely further chill the relationship between the two technology giants, which have cooperated uneasily for years even as they have competed in key businesses. Now, as Microsoft pushes more aggressively into Net-related services, the two companies may find it difficult to avoid a showdown.

The Komodo document said the technology will be built into AOL and CompuServe and then "marketed globally under multiple brand names." It adds that "the Komodo schedule is tied to the fall 2001 AOL and CompuServe client release."

According to the document, an unreleased version of CompuServe has already incorporated Komodo, using Netscape's Gecko technology as its default browser. The document adds that Komodo could be ready for widespread release as early as August but does not indicate that AOL plans to end support for IE at that time.

AOL, the largest online service with 29 million members, is expected to release the next version of its service, AOL 7.0, by the end of the year.

AOL spokesman Jim Whitney said the new Komodo-enhanced CompuServe is still in a preliminary stage, and the company is not prepared to release a version imminently. He added that the relationship with Microsoft remains valuable for the company given AOL's distribution on Windows.

"We're testing products and combinations all the time," Whitney said. "We continue to believe that carriage on Windows is important."

Microsoft declined to comment on Komodo.

AOL's tests to support multiple browsers come just months after the expiration of a five-year contract guaranteeing AOL prominent placement within Microsoft's ubiquitous Windows operating system in exchange for exclusive support for IE on its online service.

The companies' promotional contract expired Jan. 1, 2001, according to a Microsoft representative. Microsoft has since offered an extension, but AOL has declined, the representative said. With the expiration of the contract, AOL has the ability to use whatever technology it wishes as the default browser in its online service, the representative added.

Since their alliance was first brokered, AOL and Microsoft have been uneasy partners. In a sign of the importance of the deal for AOL, the company stuck by the agreement even after it purchased a competing browser with the acquisition of Netscape Communications in 1999. But the two have also clashed, most prominently in their rivalry over instant messaging.

Historically, AOL has resisted the urge to break its contract with Microsoft largely because it wanted distribution on the Windows desktop. But given AOL's sheer size and popularity, the big question is whether the company really needs Windows to add new customers.

The question "is whether AOL wants to use Microsoft as a technology provider or whether they don't, whether they view each other as a competitor in all areas or (whether they want to) utilize each other for their strengths," said David Smith, an analyst at research firm Gartner.

Whether the browser deal between AOL and Microsoft changes, it is clear the two companies stand at a crossroads.

Significantly, the two companies are engaged in a high-stakes battle over instant messaging, with Microsoft pushing its sometime partner to open its coveted "buddy" lists to competitors.

After several failed attempts to unilaterally connect to AOL's AIM service in 1999, Microsoft began championing open industry standards. The software giant has lobbied regulators overseeing the recent merger that created AOL Time Warner to impose restrictions on the company's IM businesses. The deal was approved with only minor conditions, however, despite personal pleas from Microsoft Chairman Bill Gates for regulators to do more.

The rocky relationship between AOL and Microsoft has deeper roots as well, going back to the days when the Justice Department began pursuing its antitrust case against the software giant. AOL participated in the proceeding against Microsoft and more recently contributed to a "friend of court" brief supporting the government's position in the appeal.

The Netscape and IE browsers dominated the antitrust case, in which government lawyers argued that Microsoft used its Windows monopoly to dominate the nascent browser market. In June 2000, U.S. District Judge Thomas Penfield Jackson ordered that Microsoft be broken into separate operating system and software application companies. The appeal is before a federal court in Washington, D.C.

Throughout the trial Microsoft maintained that rather than quashing competition, as the government contended, the company faced new challenges, particularly from AOL. Microsoft executives also indicated that they believed AOL continued to use Internet Explorer because it helped the government's case.

Switching to a Netscape or other browser could quickly shift the balance of market share, damaging one of the government's main arguments in the case: that Microsoft used illegal means that prevented Netscape from effectively shipping its browser.

"AOL does have the power to change the browser market overnight if they were to change which browser they use," said Gartner's Smith.

News.com's Joe Wilcox contributed to this report.