Microsoft, AOL trade jabs over Internet ambitions

Peter Kaplan

WASHINGTON: A Microsoft Corp. attorney sparred with an America Online

executive in court on Thursday, each accusing the other of plotting to dominate

the Internet.

Microsoft attorney Richard Pepperman tried to deflect charges by AOL

executive John Borthwick that Microsoft could use its new .NET strategy to

perpetuate its Windows operating system monopoly and boost its Internet

presence.

Borthwick, in charge of AOL's Advanced Services division, is the 11th witness

called by the nine states that have rejected the antitrust settlement reached in

November by Microsoft and the US Justice Department. Pepperman told US District

Judge Colleen Kollar-Kotelly that it was AOL, not Microsoft, that was planning

to use its commercial leverage to gain the upper hand.

Pepperman showed the judge the draft version of an internal AOL report from

last year in which an AOL employee recommended that the company use its Time

Warner media empire to promote its own Internet services over Microsoft's.

"(Microsoft) has nothing to match Time Warner's assets and AOL must take

advantage of this in every way it can," the AOL employee wrote in the May

23 report.

Borthwick said in written testimony on Wednesday that the new Windows XP

operating system, combined with Microsoft's .NET strategy, allows the company to

dominate the emerging area of services that reside on a Web server rather than

in software on a user's computer.

Under questioning on Thursday, Borthwick conceded that, ".NET, as it

stands today, I would describe as a relatively open platform." But

Borthwick expressed fears that once Microsoft had gained widespread use of .NET,

"over time it will become more closed."

At the center of the dispute is Microsoft's Passport service -- software that

enables computers to identify and authorize computer users so companies can

offer .NET services only to authorized people.

AOL recently joined other large companies in the Liberty Alliance, an

industry group that seeks to develop a competing authentication service, after

failing to agree with Microsoft on making .NET compatible with an AOL suite of

services dubbed Magic Carpet.

AOL, now part of the giant media and entertainment empire of AOL Time Warner

Inc., is a fierce rival of Microsoft. AOL has a private antitrust suit pending

against Microsoft on behalf of Netscape Communications, which it now owns, and

whose Internet browser marketing battles with Microsoft were the genesis of the

government's case.

For its part, Microsoft charges that its competitors have been behind the

four-year-old case from the start. The AOL employee's report cited in court on

Thursday recommends that AOL make Time Warner's media content available

exclusively on Magic Carpet Internet sites and withold Time Warner content from

sites that adopt .NET.

Borthwick said AOL never used the strategy and the report was never even

considered by senior executives at the company. "This is not the way we

pursued the business," he said. Pepperman also tried to cast doubt on AOL's

motives for joining the Liberty Alliance, saying the company had only joined at

the last minute, out of fear that Microsoft would participate first.

The Microsoft attorney also said it was AOL who had scuttled negotiations

between the two companies that were aimed at allowing Passport and Magic Carpet

to interoperate.

Borthwick conceded that as a precondition for those talks, AOL demanded that

Microsoft give Magic Carpet equal billing with Passport when computer users

first boot up their machines. Borthwick said AOL was only seeking a "level

playing field." He said negotiations ended when AOL got a

"not-positive" response from Microsoft executive Jim Allchin.