Trial focuses on AOL, Netscape talks
Microsoft used merger talks between AOL and Netscape to discredit a witness' testimony, painting the potential union as an example of the software giant's precarious place in the industry.
As the trial here entered its sixth week, Microsoft attorney Michael Lacovara used the talks to challenge economist Frederick Warren-Boulton's assertions that the software giant has abused its monopoly power by signing exclusive contracts with Internet service providers, Web sites, and computer sellers.
The monopoly charges by Warren-Boulton, who was the top antitrust economist in the Justice Department under the Reagan administration, are a crucial part of the government's case, which the DOJ and 20 states brought in May. Without them, the exclusionary acts are probably not illegal.
As earlier reported, AOL and Netscape confirmed that they were discussing a possible merger. The union reportedly could involve the online giant paying as much as $4 billion to acquire one of the leaders in Web browsing technology. Sun Microsystems reportedly is also considering acquiring a piece of Netscape's business.
In written testimony, Warren-Boulton claims Microsoft holds a monopoly in the operating system market for personal computers that run on Intel chips. He further accuses the software giant of predatory acts, such as shutting out competitors in the Internet space through restrictive contracts with Web sites, service providers, and computer vendors.
Today's cross-examination delved in painstaking detail into economic theories, such as "price earnings ratios" and "switching costs." Lacovara picked apart Warren-Boulton's assertions that the software giant in fact controls a monopoly in the operating system market for Intel-based computers and that it has used that power to restrain the ability of other companies to distribute competing products.
But Warren-Boulton refused to back down from his earlier testimony, adding that the October Zona Research report reinforced his testimony that the Microsoft contracts affect Netscape's large corporate use the least.
"If they're holding the fort anywhere, it's in large business, in which these practices in fact have no effect," Warren-Boulton said.
Lacovara also pointed to Netscape's distribution of hundreds of millions of copies of its browser via the Internet and "carpet bombing" techniques, in which Navigator is distributed to consumers.
Lacovara also challenged Warren-Boulton's assertions that the costs of switching to a non-Microsoft operating system is too high to be considered seriously by computer suppliers and end users. While Warren-Boulton eventually conceded that computer suppliers would incur relatively few costs in installing the Linux operating system on the machines they sell, he said that consumers would pay a high price in terms of having fewer applications to run on the machine.
The Microsoft lawyer said in court today that he expected his cross-examination of Warren-Boulton to last until next Monday, prompting some displeasure from U.S. District Judge Thomas Penfield Jackson. "A word to the wise," replied Jackson, who at times today appeared to have trouble staying awake. "I'm urging you to be concise."
There will be no trial on Wednesday or Thursday of this week, due to the Thanksgiving holiday. Trial is not in session on Fridays.