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Feds press Microsoft probe
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February 20, 1998: 3:14 p.m. ET
AOL and MCI say they received subpoenas from Justice Department
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NEW YORK (CNNfn) - Fanning out in its ongoing probe of alleged antitrust abuses by Microsoft Corp., the Justice Department has sent civil subpoenas to some of the nation's largest Internet service providers.
Representatives of America Online, Sprint and MCI Communications Corp. told CNNfn Friday they had received subpoenas.
The Justice Department is believed to be interested in what contractual arrangements Microsoft has made with the service providers to include its browser with software sent to customers and if those companies have agreed to favor Internet Explorer over Netscape Navigator.
The Justice Department accused Microsoft in October of attempting to use its dominance as the provider of Windows 95 operating software to unfairly gain a market advantage over Netscape Navigator.
Microsoft has vehemently rejected the assertion, saying Internet Explorer is an integral part of the Windows 95 operating system. Further, the company has claimed that the government should not be allowed to dictate how software companies improve their products.
Last year, U.S. District Judge Thomas Penfield Jackson ordered Microsoft to temporarily stop bundling the browser with Windows 95, pending a review from a court appointed expert. Microsoft is appealing the decision.
News of the widening probe was first reported Friday in the Wall Street Journal.
A spokeswoman at AOL told CNNfn Microsoft's Internet Explorer 4.0 software is bundled in software sent to AOL customers, though customer service technicians support both the Explorer browser and that of rival Netscape Communications Corp. (NSCP).
An MCI spokesman, Jim Monroe, said MCI had received subpoenas as well, but asserted that the company has software partnerships with many other firms.
Microsoft's Internet Explorer comes pre-installed in the MCI One package - a suite of products that bundles long distance, paging calling card, Internet access and e-mail. MCI customers also receive the browser in MCI's free software package.
Monroe stressed, however, that customers are free to use any browser they want. To do so, however, an MCI customer must actively disable the Internet Explorer 4.0 browser, according to MCI customer service. Instructions on replacing the IE 4.0 browser are included in the MCI software package and are provided by a technical support hotline.
IE 4.0 is MCI's official support browser.
A spokesman for Microsoft said the company is confident that once the Justice Department reviews all of the facts it will see the company is competing fairly.
Microsoft (MSFT) shares were up 1/16 to 154-15/16 by late afternoon.
The subpoenas are the latest in a string of requests soliciting further information sent by the Justice Department since December to software makers and other companies that do business with Microsoft.
In February, several companies that provide content to Microsoft's IE 4.0, including Wired Digital, the Web site subsidiary of publisher Wired Ventures, as well as Internet audio and video broadcaster AudioNet were served with subpoenas requesting information relating to the companies' active, or push, channels featured in IE 4.
Meanwhile, 11 states are currently looking into whether the software giant is forcing its browser onto computer users.
Experts reckon other Internet service providers are likely to receive subpoenas soon.
An AT&T spokesman declined comment on whether the company had received a subpoena. AT&T's Internet service, WorldNet, offers Microsoft's IE 4.0 as the bundled browser, though customers are able to use another browser of their choice.
Kate Delhagen, an Internet software analyst with Forrester Research, said AOL, like Microsoft Network, integrates IE 4.0 so seamlessly that most customers are unaware they are even using it. With AT&T's WorldNet, though, she said users were generally aware they had a choice of browsers.
Delhagen noted a "dumbing down" trend has apparently taken hold in the consumer market. Using a browser has become so easy, she said, that many consumers simply wouldn't bother to actively disable one browser and replace it with another.
Other possible subpoena targets include Prodigy, Earthlink, NetCom and regional bell companies like BellSouth, Bell Atlantic and SBC Communications.
With so much at stake, industry analysts say the Justice Department's probe of Microsoft is likely to continue for some time. However, they say the increased attention may not translate into lower profits for Microsoft.
"Yes they are going to face vigorous antitrust litigation and I expect it to go on for a number of years but it won't really hurt the company financially," said Esther Schreiber, software analyst at Credit Suisse First Boston.
In a separate development, Justice Department officials and Attorneys General from several states reportedly plan to meet early next week in San Francisco to plan strategy in the continuing antitrust suit. Eleven states are expected to attend the meeting.
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