Netscape's executives refused Microsoft's proposal. Indeed, Netscape was charging IAPs between fifteen and twenty dollars per copy of Navigator they distributed. Microsoft's tying of its Internet browser to its monopoly operating system reduces the ability of customers to choose among competing browser products because it forces OEMs and other purchasers to license or acquire the tied combination whether they want Microsoft's Internet browser or not. The intent was to make it more difficult for anyone, including systems administrators and users, to remove Internet Explorer from Windows 95 and to simultaneously complicate the experience of using Navigator with Windows 95. According to Waldman, the Apple employee had responded that Apple would not be able to change the Mac OS's default browser from Navigator until it released the next version of the operating system product in the summer of 1998. Even if it could be determined that Microsoft charges less than the profit-maximizing monopoly price, though, that would not be probative of a lack of monopoly power, for Microsoft could be charging what seems like a low short-term price in order to maximize its profits in the future for reasons unrelated to underselling any incipient competitors. Finally, while the agreement permitted AOL (subject again to the fifteen-percent shipment quotas) to distribute non-Microsoft Web browsing software when requested by third- party providers, distributors, and corporate accounts, it obligated AOL to use all reasonable efforts to cause the third party to distribute that software on its own and to minimize the use of AOL's brand name with the distribution. The large body of applications thus reinforces demand for Windows, augmenting Microsoft's dominant position and thereby perpetuating ISV incentives to write applications principally for Windows. Viewed together, three main facts indicate that Microsoft enjoys monopoly power. 306. If Intel wished to enable a new function, the employee wrote, its only "winning path" would be to convince Microsoft to support the effort in its platform software. Indeed, RealNetworks continues to do so today. If an OEM pre-installs a browser onto its PCs and places an icon for that browser on the default screen, or "desktop," of the operating system, purchasers of those PCs will be confronted with the icon as soon as the operating system finishes loading into random access memory ("RAM"). To this end, the Microsoft representatives wanted to know whether Netscape intended to adopt and build on top of the Internet-related platform that Microsoft planned to include in Windows 95, or rather to expose its own Internet-related APIs, which would compete with Microsoft's. Therefore, in order to ensure the availability of a set of applications comparable to that available for Windows, a potential rival would need to induce a very large number of ISVs to write to its operating system. The fact that a vastly larger number of applications are written for Windows than for other PC operating systems attracts consumers to Windows, because it reassures them that their interests will be met as long as they use Microsoft's product. Everything they're selling, we're going to give away for free." Although some consumers might be inclined to go without Windows 98's new non-browsing features in order to avoid Internet Explorer, OEMs are unlikely to facilitate that choice, because they want consumers to use an operating system that supports the new hardware technologies they seek to sell. The third element is the Java compiler, which translates the code written by the developer into Java "bytecode." 65. His sentiments were not shared by another Microsoft participant, Thomas Reardon, who had not failed to notice the Netscape executives grow tense when the Microsoft representatives referred to incorporating Navigator's functionality into Windows. For example, in seeking the support of Intuit, a significant application software developer, Mr. Gates was blunt, as he reported in a July 1996 internal e-mail: I was quite frank with him [Scott Cook, CEO of Intuit] that if he had a favor we could do for him that would cost us something like $1M to do that in return for switching browsers in the next few months I would be open to doing that. . 410. 177. Microsoft's Contractual Restrictions on OEM Modification. QuickTime is Apple's software architecture for creating, editing, publishing, and playing back multimedia content (e.g., audio, video, graphics, and 3-D graphics). First, Microsoft signed so-called "Gold" agreements with between thirty and fifty ICPs. 312. Fortunately for Sun, Netscape agreed in May 1995 to include a copy of Sun's Java runtime environment with every copy of Navigator, and Navigator quickly became the principal vehicle by which Sun placed copies of its Java runtime environment on the PC systems of Windows users. 216. Microsoft asserts that it restricts the freedom of OEMs to remove icons, folders, or "Start" menu entries that Microsoft places on the Windows desktop in order to ensure that consumers will enjoy ready access to the features that Microsoft's advertising has led them to expect. Although Gates viewed it as a significant concession, he acquiesced in granting AOL a place in Windows because he believed that Microsoft could not pass up the opportunity AOL presented to drive Internet Explorer's usage share dramatically upward and to exclude Navigator from a substantial part of the IAP distribution channel. The durability of Microsoft's market power in part reflects the fact that the PC operating system market is characterized by certain economies of scale in production and by significant "network effects." In October 1995, before Gates and Case began talking, a group of Microsoft executives prepared for Gates a memorandum on the company's Internet Explorer efforts entitled, "How to Get to 30% Share in 12 Months." 239. Finally, when Microsoft later released the Active Desktop as part of Internet Explorer 4.0, it added the restriction that OEMs were not to use that feature to display third-party brands. They affected consumers only by encumbering their ability to choose between competing browsing technologies. The one with 80% market share. Therefore, there is insufficient evidence to find that the requirements that Microsoft sought to impose with respect to the use of Microsoft- specific browsing technologies had any discernible, deleterious impact on Navigator's usage share. Microsoft's refusal to offer a version of Windows 98 in which its Web browser is either absent or removable, however, had no such purpose. Network operators [(IAPs, plus the telephone and cable companies providing Internet access services)] are important distributors and we will license at no cost the Internet Explorer for distribution with their Internet access business to maximize the distribution/adoption of IE as browser of choice. Plus, once invoked, the interface could be configured to load automatically the next time the PC was turned on. 130. Very few consumers would incur these costs in response to the trivial increase in the price of an Intel-compatible PC system that would result from even a substantial increase in the price of an Intel-compatible PC operating system. Intuit did not accept Gates' offer immediately, but less than a year later, in June 1997, Intuit became one of the ICPs to sign a Platinum agreement with Microsoft. Microsoft thereby unlawfully tied its Internet Explorer software to the Windows 95 version of its monopoly operating system and unlawfully leveraged its operating system monopoly to require PC manufacturers to license and distribute Internet Explorer on every PC those OEMs shipped with Windows. Sun announced in May 1995 that it had developed the Java programming language. Microsoft Senior Vice President James Allchin had similarly written on December 20, 1996, that unless Microsoft were to "leverage Windows . Microsoft contends that Felten's prototype removal program does not remove Internet Explorer's Web browsing functionalities, but rather "hides" those functionalities from the perspective of the user. According to Microsoft, its restrictions on the ability of OEMs to insert programs into the initial Windows boot sequence are meant to ensure that all Windows users experience the product the way Microsoft intended it the first time they turn on their PC systems; after all, there would be little incentive to develop a high-quality operating-system product if OEMs were free to alter it for the worse before handing it over to consumers. Microsoft asserts that the restrictions it places on the ability of OEMs to modify the Windows desktop and boot sequence are merely intended to prevent OEMs from compromising the quality and consistency of Windows after the code leaves Microsoft's physical control, but before PC consumers first begin to experience the product. One of the ways Microsoft combats piracy is by advising OEMs that they will be charged a higher price for Windows unless they drastically limit the number of PCs that they sell without an operating system pre-installed. 303. In the late summer of 1996, at around the time that it announced the availability of the IEAK, Microsoft also introduced the Internet Connection Wizard ("ICW") as a feature in Windows 95 OSR 2. UNITED STATES OF AMERICA, Plaintiff, v. MICROSOFT CORPORATION, Defendant. Despite Microsoft's and the ICPs' expectations to the contrary, consumers showed little interest in the Channel Bar, or in the Active Desktop in general, when the features debuted in the fall of 1997. Continued opening statement of David Boies for the United States: October 20, a.m. If, as it implied it was willing to do, Microsoft then bundled its media player with Windows and used a variety of tactics to limit the distribution of Apple's media player for Windows, it could succeed in extinguishing developer support for Apple's multimedia technologies. I was quite frank with him that if he had a favor we could do for him that would cost us something like $1M to do that in return for switching browsers in the next few months I would be open to doing that. 11. Compaq's executives opined that their firm could not continue in business for long without a license for Windows, so in June Compaq restored the MSN and IE icons to the Presario desktop. 333. Under the March 12 agreement, Microsoft gave AOL access to, and the right to modify, Internet Explorer source code in order to customize it for use with AOL's proprietary access software. 133. Microsoft is engaged in, and its activities substantially affect, interstate and foreign commerce. They believed that a comparable browser product offered at no charge would still not be compelling enough to consumers to detract substantially from Navigator's existing share of browser usage. Starting in early 1996, Microsoft began to condition the granting to an ISP of placement in the "Internet Connection Wizard" screens or the Online Services folder in Windows 95 on the service provider's agreement to deny most or all of its subscribers a choice of Internet browser. Engstrom proposed achieving this goal by offering Intel the following deal: Microsoft would incorporate into the Windows API set any multimedia interfaces that Intel agreed to not help Sun incorporate into the Java class libraries. Specifically, AOL agreed to ensure that in successive six-month periods, neither the number of copies of non-Microsoft Web browsing software it shipped (through any sub-channel, including GNN), nor the number of new subscribers accessing AOL (including GNN) with non-Microsoft Web browsing software, would exceed fifteen percent of the total number of copies of proprietary access software that AOL distributed through any channel (i.e., through the Windows desktop or otherwise). Finally, Internet's Explorer's usage share among subscribers to two IAPs subject to the most severe restrictions, AOL and CompuServe, rose sixty-five points, from twenty-two to eighty-seven percent. For example, Microsoft entered a contract with AOL whereby Microsoft actually paid AOL a bounty for every subscriber that it converted to access software that included Internet Explorer instead of Navigator. 121. . 98-1232 (CKK) TUNNEY ACT COMMENTS OF PROFESSOR EINER ELHAUGE ON THE PROPOSED SETTLEMENT BETWEEN THE UNITED STATES AND MICROSOFT I have been a strong supporter of the Bush Administration and its Antitrust Division. In fact, the revised version of Felten's program does not degrade the performance or stability of Windows 98 in any way. 139. In return for attractive placement by Microsoft in its Internet Connection Wizard or Online Services Folder, ISPs agreed: 79. Oem disks. `` drawn therefrom in a PC operating system to run on multiple operating systems prominent... 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