Declan McCullagh on Thu, 23 Oct 1997 19:45:30 +0200 (MET DST)

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<nettime> Bill Gates, the Bully Savior, from The Netly News


The Netly News Network (
October 21, 1997

Bill Gates, the Bully Savior
by Declan McCullagh (

     When the Justice Department yesterday accused
Microsoft of using its operating system near-monopoly
to violate the law, the government did more than
attack the world's largest software company. It also
handed Microsoft's chief competitor, Netscape, a major
business -- and political -- victory.

     Netscape has long been urging the Clinton
administration to rein in Bill Gates. For years its
lobbyists have bent the ears of powerful Washington
policymakers. And, unlike many other Silicon Valley
chiefs, Netscape's Jim Barksdale -- a veteran of such
highly regulated companies as Federal Express and
McCaw Cellular -- appears to truly understand how
Washington works. So was Janet Reno motivated by
politics, or law?

     "Fundamentally, I think it's a legal issue," says
Ed Black, president of the Computer and Communications
Industry Association. "But to say whenever the
wealthiest man in America and one of the most powerful
companies in America is challenged by a cabinet
official, you can't say there's no political impact.
You're in a political world at that level."

     When asked to name the most pressing issues
Netscape faces in Washington, company lobbyists rattle
off a long list of topics from encryption to copyright
and education. But antitrust has always topped the
list. This, after all, is the company's primary policy
goal: to stop what it considers to be Microsoft's
predatory practices. "This is not a Netscape-Microsoft
issue," says Netscape's public policy counsel Peter
Harter. "This is not a browser war. This is about
obeying the law."

     Perhaps. But clearly Netscape has been
complaining to the government about Internet Explorer
since the Microsoft browser first hit the Net.
Naturally, the company cheered Janet Reno's suggestion
that Microsoft be punished with a fine of up to $1
million a day. "We're very supportive of the actions
the Department of Justice has taken," Roberta Katz,
Netscape's chief counsel, told the Netly News last
night. "This lawsuit is about preserving competition
as we move to the era of digital commerce."

     It is, of course, also an efficient way for
Netscape to protect its commanding share of the
browser market. "Bill Gates is a successful rival who
makes it difficult for others to do business. Rather
than compete against him head to head in the market,
competitors turn to antitrust laws," says Don
Boudreaux, a professor of law and economics at Clemson
University. "What people at Netscape probably don't
like is the fact that Internet Explorer is a good

     Netscape has slowly been emerging as the grand
marshal in the Everyone But Microsoft parade. Last
year Netscape hired the heavyweight Silicon Valley law
firm of Wilson, Sonsini, Goodrich & Rosati, whose
partner Gary Reback is a veteran anti-Microsoft
campaigner. In November 1994 Reback prepared -- after
a request from the Department of Justice, which was
investigating Microsoft -- a 100-page white paper on
behalf of three anonymous high tech clients. The
theme: Microsoft's apparent anticompetitive behavior.

    Netscape's Katz declined to say how much Netscape
is assisting the government's most recent probe. "I
can't go into the details of that because it's part of
their investigation," she says. "Their investigation
is broad so we've been asked to provide information on
a broad range of software and Internet issues."

     A broad range of issues is exactly what Barksdale
hopes to influence with TechNet, Silicon Valley's
first step toward coordinated, net-wide political
action. Besides lobbying for laws to benefit its
member companies, it also will pour money into
national and state political action committees. A lot
of money, when you stop to consider just how fat
Silicon Valley has become these days. (Its executives
total 26 on Forbes' list of the 400 richest in
America.) Not surprisingly, TechNet's ranks swell with
these CEOs, including most of Microsoft's enemies from
the 1995 antitrust battle: Sun Microsystems, Cisco
Systems, Intuit, Netscape, and its former chief
nemesis, Apple Computer. Microsoft is, noticably, not
a member of TechNet, though it's been reported that
the world's biggest software maker is certainly

     In the meantime, TechNet has already begun
flexing its political muscle. Before it even launched
in July 1997, members met with President Clinton and
perennial Republican presidential contender Jack Kemp.
During the last two weeks of August the group feted
California Governor Pete Wilson, and attracted four
U.S. senators (including Senate Minority Leader Tom
Daschle (D-SD), who lunched at Netscape). Barksdale
also has the ear of Senate Majority Leader Trent Lott:
they went to Ole Miss together.

     Sen. Conrad Burns (R-Montana), who introduced a
bill to relax encryption rules, has become another
Netscape ally. When the senator christened the Burns
Telecommunications Center at Montana State University,
Barksdale showed up to speak. Soon afterwards Burns
and two other senators wrote a letter to the Federal
Trade Commission asking them to investigate
Microsoft's antitrust violations.

     Another Netscape ally is the Consumer Project on
Technology, a group founded by Ralph Nader. "Multiple
web browsers lead to open standards. One web browser
integrated into 90 percent of desktops in America
leads us to something brand new for the Internet,
which is a set of proprietary standards," says CPT's
James Love. "If Netscape exits the market, what's the
point of (Internet Engineering Task Force) or
standards setting for the Internet?" CPT has demanded
even more action from the Justice Department: Love
wants to prohibit Microsoft from shipping its browser
with its Windows operating system. The organization
has organized a two-day "Appraising Microsoft"
conference to be held in Washington on November 13 and

     Microsoft's next move will come when it files
court papers next month in response to the government.
Yet the march of technological progress seems to be on
the side of Bill Gates: When Internet access is
seamlessly integrated into Windows, who needs Netscape
Navigator? For now, at least, Wall Street doesn't seem
especially concerned about what browser consumers will
choose. Netscape stock surged more than $4 yesterday,
closing at $39.25. But Microsoft shares recovered from
an initial drop and was up over $2 a share by lunch.  


Declan McCullagh
Time Inc.
The Netly News Network
Washington Correspondent

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